Case Study

Releasing cash from a pharmacy: £480,000 Goodwill Funding

Despite the challenges of the supermarkets and the big chains, a well-run chemist's shop with a good position on a busy high street can create a great deal of wealth. 

But tax rules and the need to maintain your working capital mean you can’t access that wealth. Unless you sell up, it can be very difficult to access the equity that you have built up in the business.

But there is a way to enjoy the results of your hard work - with a Goodwill Loan, or cash out. It can help you enjoy the wealth you create in your chemist shop and pharmacy, but leave the funds in your business bank account untouched. 

We were recently approached by the owner of a small pharmacy group in the south of England. He had four branches, all of which had been paid off, and all of which were highly profitable. 

“I had a thriving business, and I was certainly making a good living, and even putting cash away - but I was not earning enough to invest elsewhere - which was frustrating as I wanted to start buying property.”

Our client was a long way from retirement and certainly didn't want to think about selling his businesses - but he did want to find a way to use the wealth he was building up within them as security for a loan.

We looked at his business and saw that the answer could be a Goodwill Loan. 

What is a pharmacy Goodwill Loan?

A Goodwill or Capital Withdrawal Loan is a means to allow certain professionals - and especially those in the medical and related sectors - to access the value in their practice business without withdrawing funds from it.

It works by letting you use the goodwill built up in your chemists shop business as the security for a loan, which you can use for a wide range of purposes, and pay back at a particularly attractive rate.

Goodwill Loans are secured on the future performance of your practice - there is no need to put your business assets or property at risk

The sums involved can be high. A Goodwill Loan can bring you a sum comparable to your annual turnover, typically between £50,000 and £500,000, with repayment terms of up to 15 years.

The rates involved can be very low - certainly lower than other types of lending that are commonly available. Interest rates will be agreed when the loan is taken out, and although they will be variable are likely to remain significantly more favourable than those provided by other lending methods.

Repayments can be made from your pre-tax profits - meaning that, in the future, a Goodwill Loan can be particularly tax-efficient.

Looking for a way to release funds in your business without selling? Find out more about Goodwill Loans

What can you do with a Goodwill Loan?

The scale of funding involved might make it possible to buy a competitor or to set up a satellite practice. You might buy premises or invest in equipment - but there is no need to use your loan to support your practice. Many practice owners use their Goodwill Loan to buy an investment property, including property overseas. Others will use them to pay for family costs like school or college fees. Some use their loan to buy another business as a sideline, or as a retirement project. 

Goodwill Loans may also provide a shrewd way to support retirement planning, or investment asset acquisition. They can be arranged for individuals who operate a professional medical or related practice as a sole trader, as a partner or as a limited company.

I couldn’t take the money out of the business to buy an investment property without running into problems with tax and cashflow. But a talk with the pharmacy funding professionals at Rangewell showed me that a Goodwill Loan might make very good sense.”

Goodwill Loans are secured on the future performance of your practice so there is no need to put your assets or possessions at risk.

How we helped

We were able to secure a Goodwill Loan of £480,000 for our client, which reflected around 60% of the value of his business. 

We were able to find a lender to provide this at a rate of just 3.2% over 15 years.

At Rangewell, we help pharmacists - and other business owners - with their funding needs. Our service is independent, fast and absolutely free. To find out more about what we can do for you, simply contact us, or find out more about what a Goodwill Loan could do for you.

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