funding a pharmacy

Pharmacy Funding

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Funding a Pharmacy

At Raising Finance, our business finance experts work across the entire lending market. We work to help you find the best funding solutions to help start up and develop your pharmacy. 

Whether you are opening a new pharmacy or taking over an existing pharmacy, it is highly likely that you will need commercial finance.

The pharmaceutical profession is highly competitive, but with the dawning of the new century comes the perfect opportunity to develop a clear and positive vision of what we want for the future of the profession.

At this point in time, there are chemists around every corner. Many are not independent, they are a part of larger chains or franchises. If you are working as an independent pharmacy, you will need to find ways to provide the same level of equipment as larger companies do. 

Whether you are starting up or you are ready to move your current business, there are various essentials you need that often require funding in order to set up a pharmacy in the UK, this includes:

  • Pharmacy equipment such as balances, drug safes and measures.
  • Shop equipment that is necessary for any business such as lighting and displays and cashier tills.
  • Vehicles: This is not always necessary for everyone but having a car to help provide a mobile service which are effective tools to help ensure that our communities have continued access to prescription medication, it also sets your pharmacy apart.
  • Security equipment like alarms, CCTV and shutters, all of which are essential for your business.

Start-up or buy an existing pharmacy? 

Starting up your own business from the ground up may be the one thing that is driving you to open up your own pharmacy. However, it is important to note that there are very few start-up/new pharmacies. To open a new pharmacy, you need to demonstrate a new or current need of services in an area and breaking even can take a number of years. You may be faced with many challenges. A common one can be that even if new sites for your pharmacy are approved these can still be challenged by existing pharmacies.

Setting up a new pharmacy in the UK.

Setting up your own practice comes with its own costs that will take its toll on your budget. The most prevalent will most likely be the costs of the premises which will typically be a simple rental agreement for the first couple of months, or even years. 

Opening up an independent pharmacy in the UK and starting up from scratch can seem daunting, however, starting one from scratch can actually be less expensive than buying an existing pharmacy. However, it comes with its own set of complications that you would not have to face if you were to buy an existing pharmacy.

funding a pharmacy

You will need to go into this venture with your eyes wide open, having done a lot of research and you also need a well thought out and detailed business plan as well as legal and financial advice and consistent marketing.

Marketing is essential for independent pharmacies. Many business owners assume that independent pharmacies are the type of businesses that will build themselves as people will just come as the need is always there, unfortunately, that is simply not the case. 

You also need to understand that with such businesses unfortunately, you will come across circumstances where there may be shoplifting which you will have to pay for. Equipment costs and equipment updates are all prices that you need to include in your business plan and budget for.

Registering a pharmacy in the UK.

A pharmacy in the UK can only be registered by a pharmacist or a partnership consisting entirely of pharmacists. A superintendent pharmacist must be appointed to take responsibility for the way in which the company carries out its professional pharmaceutical activities. 

What does a start up pharmacy need to fund?

There are a few necessities that you will need to fund right away when you get started. These include:

Who you will need.

Starting your own pharmacy may feel like a solitary venture but it isn’t something you have to do alone. The first step to starting a pharmacy is to create your own team of expert advisors. Here are some people you will need in your corner to help you through the process, for advice and a helping hand when you may need it most.

  • Mentors: Starting any type of new business comes with many pitfalls which is why it helps to have peers that have gone through the same process you are going through. They will know firsthand the challenges that you will face when starting your own pharmacy and will have real tips and hard-earned advice to share.
  • Legal counsel: This is often overlooked when you are starting your own business because there are other things that seem more pressing. Hiring a lawyer will help you navigate the many rules and regulations that come with starting your own business, especially a pharmacy.
  • Professional resources: You should also enlist the help of professionals, including a financial advisor, insurance agent/broker, accountant and franchise representative. 

As you start this process, no matter how much you may have done your homework and research you will realise that at some point you may want to consult experts in other fields including human services professionals, technology and real estate. These are all industries that are vital components in starting up your own pharmacy in the UK. As soon as you negotiate a lease or buy land to build on, you’ll need a pharmacy designer to create the plan that you will use to apply for your license. 

It’s important to note that even though you may be going into business for yourself, you will need to build a team of advisors that will help you through every step to make your dream a reality.

How to open a pharmacy in the UK

There are two key parts to the process, the first is to make an application to the local NHS team in order to be included in the pharmaceutical list. Before a registered pharmacy is able to dispense prescription issues under the National Health Service, it must be included in the pharmaceutical list relating to a Health and Wellbeing Board Area. It is important to note that this process itself can take up to four months or even longer in the event of appeals. The second is that the pharmacy premises must be registered with the General Pharmaceutical Council (which can take up to 3 months). 

Assemble a team of advisors

Tapping into some expert advice may be pricey but will be essential for you. Find a solicitor who understands you, your business plans and goal and most importantly someone who understands the independent retail pharmacy business. Having a financial broker will also help you immensely. One of the first steps in starting your business is setting up its legal status. You will also need advisors in real estate and insurance and well as lenders who are all instrumental in making your pharmacy business real. To create your own team of expert advisors. You can start by enlisting our help with funding.

Create a solid business plan

Creating a business plan is one of the most important things that you need to take time out to perfect. In a way there is always a demand for people’s pharmaceutical needs however, all of your potential customers are already going somewhere else for all their pharmacy needs. Because of this, your business plan needs to specify why those customers will come to your pharmacy instead.

Find the optimum location

When it comes to any retail business it’s always location, location, location. It is the most critical success factor. In order to choose where the optimum location to open you pharmacy will be you must consider:

– Traffic: Are your ‘ideal customers’ likely to travel to this location?

– Visibility: Will your pharmacy be easily visible to attract customers to provide a constant flow of business to your pharmacy?

– Access: Does this location allow people to easily enter and exit? Is there parking or even a drive through option?

– Size: Can your pharmacy grow in this location?

You need to do your research! Has an independent pharmacy recently closed in the area? If so, it is important that you understand the reasons why. This may present an opportunity for you to capture a customer base that was already going to an independent pharmacy. It is also important to note that you will probably only have a six-month window to save that existing customer base.

Even the largest retailers such as KFC and Starbucks conduct extensive research before settling on a location, so maybe having one of them near you is a good sign. If you are able to set your pharmacy apart with your unique products and services, your pharmacy can thrive being near one of the big chain pharmacies. 

When choosing a location for your pharmacy you need to also consider the proximity of other businesses. 

Select financing options for a pharmacy

Like any small business owner, it is important to pick the right financing option for you. At this stage, having a financial advisor is crucial to begin the process as there are many financing options available including loans from traditional lenders such as commercial banks. There are 3 key elements that most lenders are primarily looking for:

  • Good credit history 
  • Sufficient working capital 
  • A significant initial upfront investment

When you are preparing to ask for a loan, your business plan and financial statements should include three types of funding:

  • Built-out capital to pay for the building of the store itself and any renovations, fixtures or any other fixed assets.
  • Opening inventory financing, this is to pay for the initial stock you need to acquire to stock your pharmacy. While wholesalers can usually provide favorable terms for you it is highly unlikely that you will have a positive cash flow for at least the first six months.
  • Working capital in order to fund day to day operations such as utilities, bills and payroll.
pharmacy funding

Do a test run

Before your grand opening you should give yourself one or two months of operating. This will work as a trial run for your pharmacy to identify any kinks in your operations.

Before you open properly you should get some exposure for your pharmacy. This can be done though ‘coming soon’ advertisements and talking to businesses around the area in order to announce your business.

It will be helpful to plan events that will drive in customers. You can do this by offering educational programmes or partnering with other local businesses in the area. An example of this is to give away gift cards to nearby restaurants. 

Buying a pharmacy in the UK  

There are various costs that you will need to consider, whether you are buying into an existing pharmacy as a partner, attempting to buy it outright or setting up a whole new pharmacy practice. There are various ongoing costs that will need to be taken into consideration, such as the profitability of the existing business, the level of funding from NHS contracts, the current potential value of sales for non medication items. This is in addition to the core pharmacy business, amongst many other costs that are vital funding aspects to buy a pharmacy. 

Buying an existing pharmacy in the UK.

Income streams and future cash flows from existing businesses are a lot easier to predict than if you were to start the business fresh from the ground up. You are in an even better position if you are able to assess the performance of the business to understand its current cash flow and value. It will be easier to agree to a price that works in yours and the seller’s best interest. 

You need to also consider solicitors and accountant fees that you will need to pay. If the business you are trying to acquire is a large practice, you may need to do so as a partner. Another great option for you would be to buy out a current partner who may be retiring or selling their shares. We recognise that there are many challenges that come with Buy In and Buy Out finance and its provided funding tailored to help you make full use of the opportunity. 

pharmacy finance

How does a pharmacy in the UK make money?

Put simply, profit is gained by purchasing medications for the lowest possible price you can get. Co-pays and insurance reimbursement are fixed and cannot be altered by your practices so there is no profit to be gained on that front. Knowledge of generics and named brand medicine will be useful to you as the most profit is often found in the name brands, but government regulations do often dictate that generics must be used. 

Important points for new pharmacies

It is important to understand your financial needs will determine who you should approach for a loan. 

Keep in mind that one of the biggest reasons new independent pharmacies fail is cash flow. When you fill a prescription, the customer pays only a proportion of the cost, you have to bear the cost and wait 30 to 45 days for you to receive the money from customers. This is why it is very important to plan for that delay in cash flow. 

Pharmacy valuation 

Pharmacy valuation is based on an EBITDA calculation and this is normally referred to as the pharmacy goodwill value. Most banks will lend against a percentage of goodwill. 

Goodwill valuations are undertaken by specialised sector valuers, the lending may be classed as unsecured, but the lenders generally factor in that the goodwill is backed up by an NHS contract and therefore, will be priced accordingly.

Most pharmacies are based in leasehold sites and the facility term will often be matched with the lease. This means that a 15-year lease translates to a 15-year loan term. If the pharmacy owns the freehold, then lenders could lend up to 100% of the bricks and mortar valuation. Loan term on the freehold element is dependent on lenders and serviceability will need to be proven.

Moving your pharmacy site

Requests to relocate their existing pharmacy to a new site are common. Moving their pharmacy to a new site for example, inside a GP practice, can benefit the pharmacy with increased footfall into their pharmacy, they may also “take out” a competitor who was closer to the GP practice who they were losing prescriptions to. The new location will need to be close to the existing pharmacy and will also need to be approved.

The costs of the pharmacy move will normally be fit-out costs and professional fees and the final cost will depend on the size of the new space.

What are the ongoing expenses for a pharmacy?

When you are starting your pharmacy there will be many expenses that you will have to prepare for such as security measures, leases and payroll for your employees. Your largest expense is and will remain to be maintaining your prescription medication supply.

It can be difficult to maintain as you must always have enough on hand to meet monthly demand while ensuring that no medicine that you have expires before it is dispensed. Salaries and payroll come as a very close second. When it comes to starting up costs with equipment and CCTV security measures, these are all one time costs that you will not need to worry about ongoing costs. 

Funding options for pharmacists in the UK.

We can help you find the right type of funding for all your pharmacy needs such as: 

• Setting up a new business

• Acquiring new premises for your pharmacy 

• Acquire assets and equipment 

• Paying tax 

• Providing capital for growth 

• Acquire a pharmacy franchise

We help to provide pharmacists with lenders and loaning options that are best designed and suited to you and your business personally to assist with the growth and development of your business. The market for loans and finance options is so crowded that you may need assistance with finding the right financing option for you. This is where we are able to use our contacts and expertise to help you build your business in the most cost effective way. 

Unsecured business loans

Like many types of financing, Unsecured Business loans provide you with a large sum which you will agree to pay back over a certain term including interest. This is usually done through fixed monthly repayments. 

They are much like personal loans and are quite easy and simple to arrange. Lenders choose to approve your loan request based on various factors including your personal credit history and the credit rating of your business. 

Unsecured loans differ from secured loans in that they do not require you to put up any assets as security or collateral. This means that in the unfortunate event that something is to go wrong and you are unable to keep up the repayments of your loan, the lender will not be able to seize any assets. However, to make up for the lack of security on the loan, lenders usually expect a personal guarantee from you and any business partners you may have. This will ensure the lender that you will be able to make the repayments even if your business cannot. 

Why you need Raising Finance to arrange an unsecured loan for you 

In this day and age there are many unsecured loan providers for Pharmacists in the UK ranging from traditional high street bank lenders to the new generation of online lenders. All of whom have terms and rates that vary substantially. 

Finding the right lender for you is essential to minimise the cost of your borrowing. Here at raising finance, we work with you to ensure that you get the loan that is most favourable to your needs. We use our knowledge of the UK market to find lenders that suit you with the most competitive deals. 

Secured business loans

Secured loans can be one of the most cost effective ways to borrow large amounts at once. If you are looking to borrow from £50,000 or more, a secured loan will probably be a good option for you. A major advantage of using secured loans as a means of financing your pharmacy is that it can cut the cost of borrowing and can help you borrow larger amounts than other types of lending. 

Secured loans are ‘secured’ by something you use as security in case you cannot pay the loan back. This ensures the lender that in the event that you are unable to repay back the loan, they can possess whatever assets you put up as security instead. If you do not repay as upon the agreed terms, the lender had the right to take ownership of the assets. Assets can be anything of value such as estate, cars or stock. 

You are usually able to borrow more through secured loans as they are less risky for lenders. This is why they are usually a more cost effective option as they can have lower rates of interest than Unsecured loans. 

Why do you need us to arrange a Secured loan?

Just like Unsecured loans, secured loans have many different lenders offering various terms and rates and each of their rates vary substantially based on the ‘security’ being offered. We use our expertise and contacts to ensure that we find the most appropriate lender for you with the most competitive deal. We can also help you decide on the most appropriate and suitable form of security to offer. 

When large sums of money and long financial commitments are involved, it pays to have expert support on your side to guide you through what is often a stressful process. Our aim is to use our expertise to ease the stress and burden off you so you can focus on what you do best in your business.


Leasing is often a great idea if you want to maximise the use of the equipment you need without the full expense and responsibility of owning it. Leasing gives you the flexibility and freedom that could work in your favour.

With leasing you receive up to date equipment which allows you to always be ahead of your competitors and there are no upfront deposits required which works well for your cash flow.

You also have easier cash flow budgeting as repayments are fixed. The repayments are usually tailored to suit your individual circumstances. Leasing is also tax efficient as repayments may be offset against taxable profit. 

Buy-Ins and Buy-Outs

A management buy-out allows a company owner to sell their entire business to an existing management team. Instead of starting a whole new business on your own, you can join an existing practice. The simplest way to do this may be a Partner Buy-In. This is where you become a new partner and join an existing team. 

Partner Buy-Ins are common with professional practices and may be an opportunity for an existing firm to bring in new financial partners or even new talent. The most common way to Buy-In is when an existing partner is looking to leave the business or retire. 

As a new partner you will be required to put down funding to either to support the growth plans of the business or to compensate the existing partner. 

Tax loans

Paying your taxes is something that unfortunately no business can escape from. Within your first 6 months of starting your business profit margins are usually quite low, and you may even run into cash flow issues. Tax loans allow you to spread out the cost of your tax demand into affordable monthly payments. They benefit your business as you will have a controlled cash flow, they often have flexible repayment terms and you will not have HMRC on your back or receive any fines as they will receive the funds from you on time. These types of tax loans are also quick and simple to arrange. 

Funding a Pharmacy with Raising Finance

If you want to make sure you get the best price on the right finance option for your pharmacy, contact Raising Finance today. Our team use their experience and connections throughout the UK financial sector to provide you a range of options and help you choose the best funding option for your business.

We have decades of experience in the healthcare sector helping to fund the future of British businesses.

Contact us today for a free consultation on how to start or scale your business.

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