Securing Funding To Buy A Pharmacy

The independent high street chemist shop may be under increased competition from supermarket pharmacies and from the national chains, but it can still provide lucrative business. NHS scrip provision will be a mainstay of income, but the real potential comes from retail - and health products, cosmetics and electrical beauty will all help build profits.

At Rangewell, we help practitioners throughout the medical and pharmaceutical professions find solutions to their funding needs - and we recently helped two partners secure the funding they needed to take on their first chemists’ shop - with £2.250,000 of funding.

The challenge

Our clients were a pair of London-based pharmacists who had met while studying for their pharmacy qualifications, and after a few years as employees, were now ready to start taking the next step in their careers. They saw that the simplest way to become the owners of a profitable business was to buy one.

Most people setting up in the sector prefer to take over an existing chemist shop. An established pharmacy will be in the right location for the market it serves, potential customers know that is there- and it will probably have an established customer list. It also means owning a business delivering both turnover and profitability from day one.

The partners were keen to find a business near their homes. They had looked at a number of potential  acquisitions, but when a small independent chemist shop came up for sale on a busy high street in a nearby town they were certain that it had the potential they needed.

The only problem was the cost - £2.25million.

Many first time business buyers will turn to their bank. The high street banks should be the simplest and most cost-effective way to secure the funding required to purchase a business. Most lenders may consider pharmacists and pharmacy purchases as being a relatively good risk and be eager to help. However, the banks have become more reluctant to lend, particularly to people with no history of running their own business.

Our pharmacist clients approached us to help secure the funds to buy the business, after the bank they had initially approached were unable to provide the level of funding they needed.

The bank were able to make a partial offer and were prepared to advance 75% of the offer price.

The partners asked us at Rangewell to find a better solution for their funding needs.

The solution Rangewell found

We found a lender which was able to provide an 85% loan supported by a charge on the residential property owned by one of the partners - the more expensive of the two. This had the disadvantage of potentially putting the residence at risk, but with his plans for the business looking sound, the partners agreed that the risk was small. 

This still left a considerable shortfall. The partners had some savings but nothing like enough to secure the business. When then started looking to find a way to provide the remaining funds.

We adopted a more creative approach -based on jigsaw funding.

What is jigsaw funding? 

Jigsaw funding is a funding package made up of various types of loans, often from different lenders. It can be the way to provide a high level of funding when a single straightforward loan will not be adequate, and it requires a high level of expertise to arrange. Going direct to a lender can rarely secure a jigsaw arrangement - at Rangewell, because we are independent, we can work with a number of lenders simultaneously.

It means that we can set up jigsaw funding deals - providing funding when others cannot.

The funding we arranged

We also saw that a straightforward secured loan might not be the answer. We looked at the funding required, and saw that both partners had property which could act as security - and that by use of a more entrepreneurial approach, we could provide the funding they needed with a jigsaw technique.

First, we looked at the lower valued property, and used this for a secured loan - and used the second, more costly property as security for a bridging loan. Bridging loans are short term loans secured on property that are often used as part of a property purchase - but there is no restriction on how funds can be used. 

Using a bridging loan for a year would provide funds which would cover the purchase of the business, which could be repaid with a mortgage when the loan term was over.

This meant that our clients would be able to combine both funding sources to deliver ‘jigsaw’ funding to make up the total they needed for their business purchase now, and be in a bette reposition to arrange suitable commercial funding  - with our help - in a year’s time, when they could demonstrate to the banks that their business was profitable. 

Why Rangewell can be the solution for your funding needs

At Rangewell, because we are independent, and can take an entrepreneurial approach to the business of lending. We can frequently help find businesses answers to funding challenges, when going direct to lenders yourself will not.

 We can also call on the experience of our team of pharmacy finance specialists to develop innovative solutions, and to put those solutions to work.

With our experience of the entire lending market, it means we can find the funding you need - whatever your business challenge.