Pharmacy loans: What are they and is it right for your business

If you're thinking of buying a pharmacy, before you dive into the world of prescriptions and pill bottles, there's a lot to think about. From navigating government regulations to checking out the financial health of your dream pharmacy, there's plenty to consider.

This guide examines how you can find the right pharmacy to buy, how much it costs to buy a pharmacy and how to find the right business loan to fund your purchase.

What factors should you consider when buying a pharmacy?

Make sure you consider the following factors if you're considering buying a pharmacy:

• Business history. How long has the pharmacy been in business? Does it have a solid base of loyal customers?
• Business performance. You'll need to review the pharmacy's financial performance in previous years to gauge how it is performing. Check previous profit figures and forecasts for the future. Is there room for growth?
• Your experience. While it's not necessary to have previous experience running a pharmacy to qualify for a loan, previous management experience is a must.
• How the industry is faring. Regulatory changes from the federal government can have a significant impact on the profitability of pharmacies. For example, changes to the Pharmaceutical Benefits Scheme (PBS) can see the cost of drugs reduced and have a significant impact on your bottom line. You'll need to make sure you're well across the latest changes to regulations before you buy.
• Why the current owner is selling. Find out why the current owner of the pharmacy is selling as this could have a huge impact on whether buying that particular pharmacy is a successful choice.
• Suppliers. There are three main suppliers for the pharmaceutical industry in Australia: Sigma, Australian Pharmaceutical Industries Limited (API) and Symbion. This lack of competition means pharmacies only have a maximum of 30 days to pay their suppliers, which can have a significant impact on business cash flow.

Business loans you can use to buy a pharmacy

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Promoted Finder Score 8.2 Great ScotPac Boost Business Loan	Finder Score 8.2 Great	$10,000	$500,000	6 months to 3 years	$0 application fee		A business loan for any industry. Borrow between $10,000 and $500,000, with approved loans funded within 24 hours. Minimum monthly turnover of $10,000 and 1 year of trading history required.	Go to siteMore info Compare product selection Compare	loading
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Finder Score 8.5 Great Prospa Secured Business Loan	Finder Score 8.5 Great	$150,000	$500,000	3 months to 3 years	3% origination fee		A secured business loan available up to $500,000 that can be funded in 1 business day. Your business must have a turnover of at least $6,000 per month and you must provide 6 months of trading history and 3 months history for existing business purchases.	Go to siteMore info Compare product selection Compare	loading
Finder Score 8.4 Great Prospa Unsecured Business Loan	Finder Score 8.4 Great	$5,000	$150,000	3 months to 2 years	3% origination fee		An unsecured business loan available up to $150,000 that can be funded in 1 business day. You must provide 6 months of trading history, 3 months history of existing business purchases and have a turnover of $6,000+ per month.	Go to siteMore info Compare product selection Compare	loading
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How much will a pharmacy cost?

The price you'll need to pay depends on a range of factors. These include whether you buy a freehold or leasehold pharmacy, the size of the business, the number of staff employed and the range of products it sells.

The true value of a business can only be determined by analysing a long list of factors, including the following:

• Financial statements
• Physical and other assets
• Leases
• Market conditions
• Sales information
• Business plan
• Employee details
• Supplier details

To get an accurate idea of just how much a pharmacy is worth, you should engage the services of an accountant or business broker. They will be able to examine the business as well as its strengths and weaknesses to help determine a fair value.

How can I make sure the business is worth buying?

Before you buy a pharmacy or any other business, you'll need to examine and analyse the following factors:

• The pharmacy's financial position. Take a look at cash flow statements, debts, annual turnover and profit and loss statements from the past five years. Also consider any assets the pharmacy owns.
• The business itself. Is the pharmacy part of a franchise that restricts how it operates? Does the business space have all the necessary features and inclusions? What does the pharmacy sell apart from medications to ensure that it continues to turn a profit?
• Location. Location is a crucial factor in the success of any business that operates in the retail sphere, so consider the pharmacy's location and how that affects its ability to attract customers. For example, is it located in a busy shopping centre or close to a medical centre?
• Staff details. How many people does the pharmacy employ? What qualifications and experience do they have? How much are they paid?
• Supplier information. What supply agreements does the pharmacy have in place? Are they adequate or can you adjust them to suit your needs?

How can I finance the purchase of a pharmacy?

Banks, credit unions and a wide range of non-bank lenders can provide the business loan financing you need to purchase a pharmacy. However, it's not just as simple as filling out a quick application form with your personal details and the amount you want to borrow; you'll need to prepare a detailed business plan to prove your reliability as a borrower.

The lender will want the following details:

• The earnings and profit margins of the business
• Sales performance
• Sales and cash flow forecasts
• Any qualifications and previous experience you may have

Your accountant can run you through the process of developing a detailed business plan and loan application to help you find the financing you need.

Frequently asked questions

• Can I get a pharmacy loan with bad credit?

  It may still be possible to get a pharmacy loan with bad credit, though your options could be limited. Some specialist lenders focus on the healthcare sector and may consider your business's revenue and cash flow rather than relying solely on your credit score. Expect to pay a higher interest rate or provide additional security.

• What expenses can a pharmacy loan cover?

  Pharmacy loans can be used to cover a range of costs, including purchasing stock, upgrading equipment, fitting out or renovating your premises, hiring additional staff, or managing cash flow during quiet periods. Lenders may also provide finance for buying an existing pharmacy or expanding to another location.

• Do I need to provide security for a pharmacy loan?

  It depends on the lender and the type of loan you apply for. Secured loans use an asset, such as property or business equipment, as collateral and generally come with lower interest rates. Unsecured loans don't require collateral but may have stricter eligibility requirements and higher rates.

• How long does it take to get approved for a pharmacy loan?

  Approval times can range from a few hours to several weeks. Online lenders often provide faster approvals and funding, while banks and specialist financiers may take longer due to more detailed assessments. Having your financial documents ready can speed up the process.

• Can I use a pharmacy loan to buy an existing pharmacy?

  Yes. Pharmacy loans are commonly used to acquire existing businesses. Lenders will look at the pharmacy's valuation, profitability, existing customer base and your experience in the industry when assessing your application. You may be required to contribute a deposit or provide a business plan.

• What documents will I need to apply for a pharmacy loan?

  You'll typically need to provide proof of identity, business registration details, financial statements, recent tax returns, cash flow forecasts and sometimes a business plan. The exact requirements depend on the lender and the size of the loan.

• Are there government grants or support for pharmacy businesses?

  While pharmacy loans come from banks and private lenders, there may also be state or federal grants and incentives available for small businesses in healthcare. These programs change over time, so it's worth checking with your local business support agency or the Australian Government's Business.gov.au website for current options.

• What interest rate can I expect on a pharmacy loan?

  Interest rates vary depending on the lender, loan type, security offered and your business's financial situation. Secured loans generally have lower rates, while unsecured loans and those for borrowers with less established credit histories tend to be higher. Comparing multiple offers can help you find a competitive deal.

• How much can I borrow with a pharmacy loan?

  Although borrowing criteria vary between lenders, you will generally be able to access 75% of the business's value. If you use your residential property as security, loans for up to 100% of the business value are available.

• Can I make interest-only repayments with a pharmacy loan?

  It can be quite difficult to get approval for a loan to set up a pharmacy in an existing suburb due to the fact that there is most likely already plenty of well-established competition in place. However, you may be able to find financing if you want to set up a pharmacy in a new or expanding suburb.

• Is there any special equipment I need to run a pharmacy?

  Yes. Depending on the type of pharmacy, you may need equipment such as wheelchairs, walking aids, bathroom aids, refrigerators, incubators, breast pumps, scales and more. When buying a pharmacy, it's also important to consider your equipment finance needs.

Written by

Tim Falk

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Tim Falk is a writer for Finder, writing across a diverse range of topics. Over the course of his 15-year writing career, Tim has reported on everything from travel and personal finance to pets and TV soap operas. When he’s not staring at his computer, you can usually find him exploring the great outdoors. See full bio