Pharmacy Business Loans: The Complete Guide

When independent pharmacy owners require additional working capital for their businesses, they are likely to visit their banker for a discussion of the different types of pharmacy business loans they have access to. 

As with any other business owner looking to borrow money, banks will need to assess the pharmacy’s current creditworthiness, including specific data about the pharmacy.

This data will include their financial records, both personal and business. It will be scrutinized and their FICO must also be high to qualify for funding. If the owner has had issues with late payments to suppliers, for example, their application may be rejected.

Sometimes business owners are not satisfied with the options available to them when they are seeking pharmacy business loans at one bank. 

They may be looking for additional working capital to purchase inventory from a new supplier, to renovate their existing location, expand to another, change signage and even upgrade their POS terminals. 

So, what exactly are pharmacy business loans, and how can you choose the best option for your company? Continue reading for the complete guide to pharmacy financing. 

What Are Pharmacy Business Loans? 

Pharmacy business loans refer to a wide variety of specialized financial products designed to meet the unique demands of pharmacies. They provide funding for various purposes, including inventory purchases, equipment acquisition, facility renovation, or expansion.

These loans come in several forms, such as term loans, lines of credit, and equipment financing, each tailored to support the operational and growth objectives of pharmacy businesses.

What Are The Different Types of Pharmacy Business Loans? 

If you are looking for additional financing for your pharmacy business, it’s important to keep in mind that there are different options that you can choose from. Let’s take a look at some of the most common ones:

Term Loans

Among the most sought-after pharmacy business loans are term loans, in which a financial institution such as National Business Capital provides you with a lump sum of money upfront, which should be paid back – along with interest – over a set period of time. 

There are different types of term loans that you can choose from:

• Short-term loans – typically have a repayment period between 6 and 18 months. They are ideal for situations with a near-immediate ROI from financing, such as purchasing bulk inventory for a peak season. 
• Intermediate-term loans – they have a longer repayment period, usually between 1 and 3 years, although it may depend on the lender. It’s the perfect middle ground for pharmacy owners who don’t need short or long-term financing.
• Long-term loans – the repayment period can go up to 10 years or more for larger loans. They are ideal for business expansion projects, large capital investments, or refinancing existing debt. The longer period also typically lowers monthly payments as they are spread out for as long as possible.

Business Line of Credit

If you are looking for pharmacy business loans that provide more flexibility on an as-needed basis, a business line of credit can be another great option. 

Unlike a term loan, in which the full loan amount is received upfront and repaid over time, a business line of credit allows you to borrow up to a certain limit, repay, and then borrow again – much like a credit card. You only pay interest on the amount drawn. 

Business lines of credit are a great financing tool if:

• Your pharmacy often experiences fluctuations in cash flow due to varying demand, insurance reimbursements, and seasonal sales. 
• You need to handle unexpected expenses, including equipment failures, emergency repairs, or the need to replace damaged or expired stock. 
• You need funding for more effective inventory management, including stocking up on pharmaceuticals and other health products.
• Your pharmacy has an opportunity for growth, such as expanding the portfolio of services or enhancing your digital infrastructure.
• You are looking for a cost-effective financing option – as opposed to other types of pharmacy business loans, interest is only paid on the amount drawn, and not on the total credit limit. 

SBA Loans

SBA loans are among the most popular financing options for businesses across a variety of industries, and the pharmaceutical industry is not an exception.

They are backed up by the Small Business Administration (SBA), a US government agency designed to support the development of small businesses. Because the government provides a guarantee for the lender (which reduces risk), we are typically looking at lower interest rates and better overall terms. 

Unfortunately, getting an SBA loan can take up to 8 months – that’s why it’s important to work with a lender who can speed up the funding process. With NBC, you can go through the whole process in a perfectly streamlined manner, which takes just 45 days! 

If you are looking for pharmacy business loans, here are a few options you have with SBA loans:

• 7(a) Loan Program – suitable for a variety of purposes including working capital, expansion, and buying equipment. 
• 504 Loan Program – this program is designed for purchasing or renovating real estate or major equipment; so, if you are looking to build or renovate your pharmacy premises, it can be a good option for you. 
• SBA Microloan Program – microloans are small loans up to $50,000, ideal for smaller-scale needs like purchasing inventory or small equipment. This can be beneficial for new or smaller pharmacies.

Equipment Financing

When it comes to pharmacy business loans, another option you have at your disposal is equipment financing. It is specifically designed for the purchase of business equipment, which also often serves as collateral for the loan.

You can use it to purchase:

• Automated dispensing systems
• Specialized compounding equipment
• High-quality refrigeration systems
• Point-of-Sale (POS) Systems
• Pharmaceutical counters
• Shelving and storage solutions
• Blood pressure monitors 

Other types of pharmaceutical equipment are needed to enhance patient safety, modernize operations, improve the accuracy of prescription filling, and increase overall productivity without a significant initial capital expenditure.

Small Business Loans

Speaking of good pharmacy business loans, it’s also important to mention Small Business Loans – they are designed to provide funding to small businesses in order to support their growth, development, and expansion. 

Small business loans provide you with a lump sum for a wide variety of purposes, including:

• Working capital – They are perfect for covering day-to-day operational expenses such as payroll, rent, and utilities, especially during slower periods.
• Facility renovations – A great option if you are planning to expand the physical space of your pharmacy or renovate your existing facilities. 
• Inventory purchases – Pharmacies require a continuous supply of medications, and other inventory, which can be managed with small business loans.
• Marketing – Developing a marketing strategy to attract new customers and retain existing ones is vital for any pharmacy, but it often requires extra capital. 

How Do I Qualify For Pharmacy Business Loans? 

So, what can you do in order to qualify for pharmacy business loans? The exact answer will depend on the lender and the type of loan you’ve decided to opt for, but eligibility criteria usually look like this:

• Having a business age of at least 1 year
• Generating at least $500,000+ in annual revenue
• Having a good credit score of +650 or above
• A good Debt-to-Income (DTI) Ratio
• Legal and regulatory compliance
• Bank statements
• Cash flow statements
• Tax returns

You may be asked to provide additional proof, documentation, or collateral depending on your financial situation, the loan, and the lender. 

Applying for Pharmacy Business Loans

If you are looking to leverage the benefits of pharmacy business loans, look no further than National Business Capital. With a single application, you can get access to dozens of exclusive offers so you can make the best decision for your business.

With $2+ billion financed since 2007, multiple awards, and an experienced team of Business Finance Advisors, we have everything you need to find the best financing options for your project.

Are you ready to get started? Apply here.