Financing Types for Georgia Pharmacies Available

By Brad MacLiver
Authorship and profile at Google


There are a number of different options available for funding GA pharmacy franchises, specialty pharmacies, and traditional community drug stores.

SBA Financing for Pharmacy Business Loans

The U.S. Small Business Administration (SBA) partially guarantees loans for Georgia pharmacy franchise lenders reducing the risk exposure for the lender. A loan program called 7(a) is a standard for funding pharmacy franchises. These loans can provide funds for pharmacy franchise entry fees, real estate where the pharmacy in Georgia will be located, property improvements, working capital, and pharmacy related equipment.

Borrowers for the pharmacy franchise must be creditworthy, without any bankruptcies, have ample down payment, but there are variations here, and the business must be able to repay the loan from the cash flow of the pharmacy.

Terms can range from 5 to 20 years. Within SBA standards interest rates may be adjustable or fixed and will be negotiated by the lender dependent on the financial strength of the pharmacy transaction.

There are SBA fees for guaranteeing pharmacy business loans. These fees, which are paid to the government and not kept by the bank, can be rolled into the Georgia pharmacy financing.

Patriot Express Business Loan Program

The Patriot Express Business Loan Program is another SBA loan program that can be used for business loans in a pharmacy franchise.  This loan is strictly reserved for military veterans, active service members, their spouses, and survivors.  If using this loan, the Department of Veterans Affairs would be directly involved with the Georgia pharmacy loan process.

Georgia pharmacy funding using the Patriot Express program have the benefit of relatively fast approval times and a smaller down payment from borrowers than traditional business loans.  Lower credit scores can also be accepted.  Opportunities are provided by patriot Express business loans for lower interest rates than most Georgia pharmacy business loans.

Funding for Pharmacists in GA Who Are Veterans

Specific franchise loan programs are available for honorably discharged veterans.  These Vet programs are another possibility for pharmacy franchise loans.

Pharmacy Financing From the Franchisor

With a pharmacy franchisor, financing a Georgia pharmacy franchisee is a usual topic in discussion. Franchisors should have the option to direct potential drug store franchisees toward funding programs that have been successful in the past for their other pharmacy franchisees. Preferred lenders will already be familiar with the pharmacy franchisor and their systems.

Pharmacy franchisors may also provide some funding internally. Lower collateral will be offset by higher interest rates. This may help with qualifying for a pharmacy acquisition of a franchise in Georgia, but may hurt the franchisee’s long term cash flow. Due diligence of pharmacy franchisor funding should be completed before any final decisions are made.

Personal Assets Used in Pharmacy Finance

Not all prospective pharmacy franchise owners have enough cash on hand. Part of the drug store business financing may require the borrower to liquidate personal stocks, provide personal assets as collateral, refinance their home, or use their 401k to assist the lenders security for making the pharmacy business loan.

If the borrower still does not have enough personal assets then a family member or a friend may be required as a partner in the Georgia pharmacy. Since the GA pharmacy partner’s cash and assets will also be at risk of loss, these partners may require some controlling interest in the drug store.

Retirement Accounts Used in Pharmacy Finance

Retirement Plans can be self-directed and used to invest into a Georgia pharmacy franchise. The retirement plan can purchase stock in the pharmacy franchise. This is similar to how the retirement plan currently may be investing in publicly traded stocks and mutual funds. Lower debt service and higher profit potential may result when incorporating this option that uses less external financing in funding the franchise.

The downside is, if the pharmacy in Georgia crashes, so does the retirement fund. The method of providing less expensive financing for the pharmacy needs to be weighed against the risk of failure.

Because of the factors involved such as deferred taxes, early or improper distributions, and IRS involvement, funding a pharmacy transaction with a retirement account should be handled by a company who has expertise in this arena. Georgia pharmacists and investors interested in using this financing structure should research the Employee Retirement Income Security Act of 1974 (ERISA).

Pharmacy Franchise Agreement Buyout Funding

Understand that pharmacy situations are changing, economic factors are a concern, mail order pharmacy is growing, and market shares are shifting. All of these can have a negative impact on the cash flow of a pharmacy franchise. Drug store owners paying franchise royalty payments may not survive the tightening profit ratios. Due to this, these Georgia pharmacy franchises may only have the options of bankruptcy, or buying out the franchise agreement when allowable.

Buying out the franchisor allows the pharmacy to remove the franchisor from the equation. This in turn allows the pharmacy owner more flexibility in their business decisions. The pharmacy franchisor sold the drug store franchise with expectations of earning income from the cash flow their pharmacy franchisees. Due to their long term plan, Franchisors may not be willing to allow the Georgia pharmacy franchisee to remove itself from the franchisor. However if a Franchise Agreement Buyout can be negotiated, the buy-out transaction can also be financed.

Unfortunately many banks don’t understand the dynamics of the Georgia pharmacy industry. This lack of pharmacy knowledge results in the banks looking at the funding request and all they see is a business that has very little collateral compared to amount of financing the pharmacy is requesting. To assist the successful funding process a pharmacy owner in Georgia is advised to use a pharmacy industry specialist to capitalize on the funding opportunities that are available.

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