Pharmacy finance for buying, refitting and running a pharmacy

An acquisition is usually the largest financial decision a pharmacist makes. The purchase price is largely driven by the pharmacy's historical performance, dispensing volumes and cash flow, so lenders will study the same figures. Budget for more than the price itself: stock at valuation, equipment, legal and due diligence costs, and working capital to pay wages while you settle in.

Acquisitions are typically funded with a combination of your own deposit, a term loan against the business's goodwill and, where the property is included, a commercial mortgage. Specialist pharmacy lenders tend to understand goodwill-based lending better than generalist banks, which is one reason to compare the market. For a wider view of how deals are structured, see our guide to acquisition finance.

Carry out thorough due diligence before committing: review the accounts, dispensing data, lease or title, staffing and any regulatory history.

Pharmacy finance is usually available to GPhC-registered pharmacists and pharmacy companies with steady or growing dispensing volumes, clean accounts and bank conduct, and, for a purchase, a personal deposit and a clear route to taking over the NHS contract and premises. First-time buyers with strong pharmacy experience are often considered. Lenders look at:

• Credit history for the business and its directors or partners
• Cash flow and profitability, shown in accounts and bank statements
• Monthly dispensing volumes, the split between NHS, private-service and retail income, and whether items dispensed are rising or falling
• Your experience in pharmacy and in running a business, and General Pharmaceutical Council registration
• For acquisitions, how the NHS contract and premises lease transfer to you
• A business plan and projections for acquisitions or new branches
• Location, local competition and demand

Goodwill-based acquisition loans and unsecured facilities usually need personal guarantees from the directors. Freehold purchases are secured on the property, and asset finance is secured on the equipment. Ask whether a guarantee can be capped and take legal advice before signing.

Depending on the need, a pharmacy owner can often reduce or replace borrowing by using the seller, the wholesaler, existing equipment or HMRC's payment arrangements.

• On a purchase, vendor finance or deferred consideration can reduce the deposit, with part of the price paid from future profits; our pharmacy acquisition finance page shows how it sits alongside a goodwill loan.
• Agreeing longer payment terms or a higher credit limit with your wholesaler can ease the gap between buying stock and receiving NHS payment.
• Asset refinancing can release cash from a dispensing robot or refit you already own.
• For a VAT or corporation tax bill, compare a loan with HMRC Time to Pay.