Banks are actively seeking good projects to fund and that includes independent pharmacies.

Most pharmacy owners are eligible for SBA-guaranteed loans that may offer some advantages to a borrower. In an SBA loan, the bank makes the loan, but the debt is partially guaranteed by the SBA. This allows the bank to provide credit for a borrower who may otherwise have difficulty obtaining a loan with favorable terms. SBA loans tend to be borrower friendly, flexible to equity and collateral requirements, and do not have loan covenants. SBA loans have longer terms with no balloons. For example, a conventional loan may have a 10-year amortization with a balloon in 3-5 years, while an SBA loan will have an amortization and term of 10 years. The SBA acts like an insurance company, allowing the bank to extend its conventional credit reach.

Not surprisingly, SBA lending requires numerous documents and can be tedious for borrowers when the lender is not a specialist. When considering an SBA loan, it is helpful to seek out a lender who is part of SBA’s Preferred Lender Program. A PLP lender will know how to determine eligibility and properly structure the loan. PLP status allows the bank to approve the loan without waiting for the SBA’s approval; the bank acts on behalf of the SBA.

When banks are reviewing and analyzing a loan request, a lender will generally request the following: three years of tax returns for the pharmacy and the borrower, a yearto- date financial statement for the pharmacy, a personal financial statement of the borrower, as well as a business plan complete with three years of financial projections. This information will help the lender understand the owner and the business, and determine creditworthiness.

Read the full article here: A Primer on Pharmacy Financing

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