Case Study

Securing £750,000 short lease funding to buy a pharmacy

Why a short lease needn't be the end of the line

Banks and other lenders may be very willing to agree funding for an established business, or an experienced business owner. They see a successful trading record as a sign that the business will be profitable in the future - and they are likely to be paid back. But what happens when the future for the business does not look as positive - because the lease is too short to cover the payback? 

Our client was a pharmacist who had several years experience running a series of chemist shops. With four shops in his chain he saw a fourth that might be a worthwhile addition to his business. 

“I saw the property in the next town to where we live and had a look inside. It had a lot going for it, with a good position and a busy street location - and plenty of footfall. It might need a little refreshment inside, but nothing too drastic - and with my existing businesses, it would mean I could enjoy economies of scale. I even had a manager who I could put in.”

It had a good location in the centre of a town not too far from his other shops and there were no major competitors nearby.

With a thriving existing business he should have had no problem securing the new business, at the asking price of £750,000 which was reasonable for the region and the level of profit the business was already generating. However, there was a problem. 

A short lease - and lenders

The lease on the new property was just six years long. It would be impractical to provide the level of funding required - £650,000 - over that period. Repayments would be upward of £100,000 per year.

“I knew the property was a potential gold mine because of the location and once I had taken over the business, I was confident that I could renegotiate a renewal of the lease with the landlord.“

It seemed a sound strategy but, despite his excellent business record, lenders would not lend on that basis. 

The business owner approached us for a solution. We knew that banks can provide the most cost-effective source of funding for many small businesses, but they have very tight lending criteria that they must follow. We realised that there was scope to get the funding required - if we could provide a way to overcome the restrictions banks set for themselves. 

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How we helped

We set out a plan of action designed to provide an answer. We used our personal contacts at other Tier One Banks to talk to decision-makers we felt would recognise the potential of the business and be in the best position to help, and arranged a term loan over 15 years, which would allow the repayments to be reduced to a manageable level.

We included within this agreement a break clause at six years. This would allow our client to repay without penalty after six years, with the intention of then arranging a refinance agreement, which would reflect his business at that time - which should include a new long-term lease agreement. 

Under these circumstances, the bank was able to offer the funding required 

Because we had contacts at the bank, we were able to streamline the application - which can take months - and get the offer in principle inside a week - which allowed our client to agree the deal with the outgoing owner. 

  • £650,000 at 4%
  • 15 years term
  • Current monthly
  • Repayments £4,476.14
  • Annual cost £53,712

“Obviously, I will have some work to do in the future to keep my new branch running - but by then I should have the lease sorted out - and I know that Rangewell will be able to help me again.”

At Rangewell, we help pharmacists - and other business owners - find the answers they must have for their funding needs. So whether you are looking for Start-up Finance for your pharmacy to specialised Tax Loans or buyouts, our team can help.

Our service is independent, fast and absolutely free - and means having an expert working to find you the financial answers you need. To find out more about what we can do for you, simply call us at Rangewell.

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