Financing California Pharmacy Franchises

By Brad MacLiver
Authorship and profile at Google


A pharmacy franchise in CA is a contractual relationship between two parties. One, the Pharmacy Franchisor is the party that developed their drug store business model, branded the pharmacy related products, and produced the system the pharmacy franchisees will operate under. The second party, the Pharmacy Franchisee, purchases a franchise license from the Pharmacy Franchisor, and usually pays an ongoing pharmacy franchise fee, or royalty fees, to use the name, products, systems, trade secrets, etc., created by the Pharmacy Franchisor.

There are a number of options for financing a pharmacy franchise business. All California pharmacy franchise funding sources, for drug stores, prefer lending to a pharmacy franchisee who will be working with a nationally recognized name and long track records. Newer pharmacy franchise models won’t possess these two traits and will be considered more risky.

Traditional Bank Financing used in funding a pharmacy franchise is available when a pharmacy franchise has the track record and pharmacy name recognition. Many of the banks will show interest in this type of funding opportunity. Unfortunately once the bank reviews the loan documents, many of these banks decline the funding request because they don’t understand the security provided for the California pharmacy loan. Community drug stores typically have very little traditional assets to offer as security. Pharmacy lenders will use traditional methods for analyzing the cash flow needed to service to the debt, but they also will need to know about nontraditional collateral that will secure the loan.

As a borrower, even an incorporated one, the personal credit rating of the independent drug store owner will be a factor along with financial statements and tax returns. The amount of actual cash on hand and verification of the down payment's source will be critical factor in qualifying for a pharmacy business loan in California.

CA Pharmacy Franchise Funding Tips:

1. There are several pharmacy franchise financing options available, so pharmacy owners should engage in proper due diligence, then obtain the pharmacy funding that best fits their situation.

2. It is advisable to have an accountant or attorney that is familiar with pharmacy franchise financing to review the California pharmacy business loan documents.

3. There are pharmacy consulting services and franchise associations who can help guide a prospective pharmacy franchisee or borrower or a drug store loan.

4. New pharmacy owners need to make sure their funding request is enough to get the pharmacy running and profitable. Less than ample funding for the initial stages may put the drug store in a position of needing additional funding. Smaller working capital loans that would be in a subordinated position will be more difficult to obtain at a later date.

When pharmacy owners have questions and need information regarding pharmacy franchise business loans, or any types of funding for community drug stores and California pharmacies, they should contact a pharmacy industry specialist who can provide quality answers and sound advice.

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