Independent pharmacies and pharmacists may sometimes need a little injection of cash flow beyond what’s in their bank accounts, and that’s where pharmacy loans and financing can be helpful.
In this article, we’ll look at how you can use a pharmacy loan to grow and stabilize your business, as well as different financing options to consider.
How A Business Loan Can Help Your Pharmacy
Healthcare businesses like pharmacies can use small business loans to cover expenses when cash flow isn’t steady. Borrowers can also use a business loan for working capital to purchase equipment, hire employees, or invest in additional locations.
You could also use the funds to remodel your pharmacy or keep it running during a slow period. A business loan can essentially be used for any expense that your business has.
Pharmacy loans can also help you take advantage of opportunities for growth. Imagine discovering that an existing pharmacy across town is for sale. It could be a fantastic opportunity for you to expand to a second location, but without capital, you might miss out on that opportunity. On the other hand, being able to borrow the funds to buy the business could be what takes your pharmacy business to the next level.
Types of Loans for Pharmacies
As a pharmacist, you have several financing options you can use for new purchases or even refinance existing debt. Some are ideal for applicants with great credit, while others, which may come with higher fees, will be open for you if you have poor credit.
Banks, credit unions, and some online lenders offer business term loans with lower interest rates and longer repayment terms. Some of these loans, however, may be harder to qualify for if you haven’t been in business for at least two years and have a good credit history.
The Small Business Administration’s 7(a) loan program offers lower rates and long repayment periods for businesses. These loans can be used for working capital, commercial real estate, and equipment.
Line of Credit
Whereas a loan provides a lump sum of cash all at once, a business line of credit lets you access up to a threshold amount that you can borrow up to, repay, and borrow it again. It’s ideal if you need some capital now and the rest later.
If you need to purchase computers or other types of equipment for your pharmacy business, that equipment can serve as your collateral with equipment loans. Because of that collateral, you may be able to get great interest rates.
Merchant Cash Advance
If you aren’t able to qualify for the above options, a merchant cash advance could be worth considering. While it’s not a loan, it is an advance on future credit card sales. You’ll pay back that advance daily or weekly from your credit and debit card transactions until it’s paid back, plus an origination fee.
If you don’t necessarily need access to cash but do want credit to purchase supplies for your pharmacy, business credit cards could be useful. However, many have high interest rates, which can add to what you pay to use them. Look for a card that has a 0% APR introductory rate and a rewards program.
Short-term loans are another option if your credit isn’t good. Short-term lenders look at other factors besides credit scores, which may make this type of financing easier for you to qualify for. Be aware that these tend to have shorter repayment periods (many just a few months long) and higher interest rates.
Do Pharmacists Qualify for Physician Loans?
There are certain lenders who offer loans to health care professionals who work as physicians, and you may wonder if you could apply for one of these.
The answer is…it depends. Some lenders are very specific about who can apply, while others will approve pharmacy owners who apply. If you’re unsure, speak to a lending specialist to see if you qualify.
How to Qualify for a Pharmacy Loan
Speaking of qualifying for a pharmacy loan, the lender you work with as well as the loan type will have specific eligibility requirements.
Most look at your business and/or personal credit history as well as credit scores, as well as how long you have been in business, to determine the interest rate you qualify for.
So why should you learn how to establish business credit? The better your credit, the lower the interest rate you may qualify for, and the lower your monthly payments. This can save you money over time on the financial product you choose.
How to Apply for a Pharmacy Loan
Some pharmacy loans have quick online applications, while if you work with a bank, you may be required to apply in person and provide more financial documents.
Generally, expect to be asked questions about your pharmacy business, including location, time in business, and annual revenues. You may also need to give details about your personal situation, including income and Social Security number. You will also be asked for the loan amount you would like to borrow.
Assuming you are approved for the loan, you will be presented with the loan terms you qualify for, in terms of interest rate and loan repayment period. You’ll review your loan agreement and sign it. Then, depending on how quickly the lender can process your loan, you could receive funds deposited into your business bank account in as little as one day.
Nav’s Verdict: Pharmacy Loans
Small business owners who work in the pharmacy business need to have access to capital to keep their pharmacies running smoothly as well as taking advantage of any opportunities for growth.
This article was originally written on May 4, 2021.