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    3 Replies Latest reply on Apr 28, 2010 12:16 PM by pill1973

    Pharmacy Purchase Financing

    pill1973 Newbie
      I am a pharmacist with 10 years of experience. I am interested in purchasing a running pharmacy but i need to get information about loan process and banks who specializes in lending money to Pharmacies.

      I learned that the default rate for pharmacies is less than 0.5%.

      Thank you.
        • Re: Pharmacy Purchase Financing
          phanio Pioneer
          I think this has been answered before. But, I don't know if there are certain banks or lenders that will fund your business just because it is a pharmacy. Banks and lender look at your ability to repay the loan or service the debt.

          You might put together a business plan and find banks in your area that offer SBA guaranteed loans.

          If you are planning on buying an existing pharmacy - you might ask the current owner to carry the note. Thus, if you can come up with say 10% down (easier to get approval for) - have the current owner carry the rest at 25 year amortization with 5 year balloon.

          You could even hire a business broker to help you search - plus, most brokers knwo of local lenders who will want to do business with you.

          Business Money Today

            • Re: Pharmacy Purchase Financing
              pill1973 Newbie
              Thank you again for these great feedbacks.

              I am browsing on the website you provided me and it is making alot of things cleared.
              In fact i found a bank "liveoakbank" who only lend money to Pharmacies, Veterinary Clinics and Dentists, thats a great starting point.

              One seller carry back point, i was wondering in what circumstances would a seller want to carry a % of loan?

              I understand that it depends but what would be a ballpart range APR for those seller financed loans?
                • Re: Pharmacy Purchase Financing
                  phanio Pioneer

                  Deciding to carry a note (on the seller's part) is really based on them. Some would carry the note to reduce their capital gains taxes or if they feel better about receiving payments over time or even if they feel that they can remain (in a small way) part of the business - hard to know their situation or their preference.

                  I like sellers who carry the note for two reasons. 1) Usually easier to get approved with less hassle and less fees. 2) It also means that the seller is confident in the business making long-term money.

                  If you get a seller interested - the rate, percentage down, amortization, etc - is really up to them and what fits them best - all things are negoitable. Given that this is a low interest market - your bank pays 0% - some CDs up to 1.5% and risk free bonds around 2.5% and the stock market usually does 12% to 15% but only over a 20 plus year period.

                  Thus, as a seller holding a note, a rate of 8% or 10% may not be that bad for them - better than what they will do elsewhere (in finance it is called opportunity costs).

                  If you find a seller willing to finance - offer 10% down - then amortize the remaining 90% over 20 or 25 years (this is to set a payment) - then set a balloon payment after five years. When five years hits, this gives the seller (the note holder) the option to refinance with you or to call the balloon (it is essentially you offering them some long-term protection). Plus, in five years, the market may have recovered, banks are knocking at your door, business is booming and you might want to re-finance with someone else at better terms.

                  Best of luck,

                  Business Money Today