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Pharmacies are a big business in the United States. According to some estimates, the market will grow from 560 billion in 2021 to 861 billion by 2028, representing a CAGR of 6.3% in this period. The pandemic was a significant driver of growth for this industry and has since sustained its momentum even as the world emerges from the pandemic.
An aging population in the US, increasing prevalence of diseases, and rising healthcare expenses are some of the reasons behind the explosive growth of the pharmaceutical market. Witnessing this potential, many business owners are now looking to obtain pharmacy business loans to carve a slice of this market for themselves.
Benefits of owning a pharmacy business
Despite the prevalence of large pharmacy chains across the country, you’ll be surprised to know that independently owned pharmacies represent nearly 40% of all pharmacies in the United States. The vast majority of these are located in the rural or urban areas of the country.
For better or for worse, there’s always going to be a need for pharmacies. People will always have prescriptions that they need to get filled or over-the-counter medicine that they need to purchase. COVID testing has become another lucrative source of revenue for pharmacies.
None of that would be possible without pharmacies. A pharmacy business that’s situated in a decent population center can expect to see a steady stream of customers. By utilizing one of the many pharmacy lending options available, you could be in a position to launch your own.
How to get pharmacy loans
Pharmacies have the potential to be more profitable than other businesses in the healthcare industry, however, they cost much more to start. Some estimates suggest that at least $300,000 in working capital is required to start or acquire an independent pharmacy.
Conventional banks are open to providing pharmacy business loans but their eligibility criteria can often be difficult to match for someone who’s just starting out. The appraisals and due diligence process are very thorough and loans are likely to be refused if the borrower is unable to meet the criteria.
SBA pharmacy loans
Consider pharmacy business loans backed by the Small Business Administration. This government agency guarantees a significant portion of your loan. Since the risk is lowered for the conventional financial institution, they’re more willing to sanction the loan.
There are multiple SBA pharmacy loans that you can consider, keeping in mind the fact that considerable capital is required to both start a new pharmacy or to acquire a running independent pharmacy business.
SBA 7(a) loans for a pharmacy business
The SBA 7(a) is a great option if you’re looking to establish a new pharmacy or looking to acquire an existing business. The highest loan amounts are offered under this program, making it possible for you to venture into this capital-intensive business with adequate funds.
A total of $5 million can be borrowed through the SBA 7(a) loan program. You can use these funds to purchase merchandise, and inventory, and meet your working capital requirements. These funds can also be used to purchase an existing business, acquire real estate to construct a new pharmacy, and even buy out a partner. It is possible to refinance your current business debt with pharmacy loans.
You can negotiate with the lender to obtain a fixed or variable rate loan with repayment terms of up to 25 years. The SBA imposes a cap on interest rates so don’t expect to pay more than 2.75% over the base prime rate.
SBA Express pharmacy loans
These loans are also extended as part of the SBA’s 7(a) but they’re particularly meant for those business owners who seek quick approval of their applications. The maximum loan amount under this pharmacy lending program is $500,000 which can be enough to open an independent pharmacy in most cities across the country.
The funds can be used to purchase merchandise and equipment in addition to meeting working capital needs. You can opt for repayment terms of up to 10 years and interest rates that combine the prime rate with an up to 6% spread.
How to get SBA pharmacy loans
At SBALenders.com, we help connect you to the banks and financial institutions that are ready to approve pharmacy loans quickly. Our network of SBA Preferred Lenders includes nationwide banks and credit unions that have considerable experience coming up with financing solutions for pharmacy business owners.
The pharmacy’s growth is already evident – as the population continues to grow, the demand for pharmacies also increases. Just provide us some basic information here, and we can provide access to our SBA lender network.
| Rank | Bank | City | State | # of Loans | Avg Loan $ | Avg Interest |
|---|---|---|---|---|---|---|
| 1 | The Huntington National Bank | Columbus | OH | 74 | $154,511 | 6.5% |
| 2 | U.S. Bank | Cincinnati | OH | 58 | $64,066 | 7.0% |
| 3 | Live Oak | Wilmington | NC | 51 | $777,314 | 6.6% |
| 4 | BayFirst National Bank | Saint Petersburg | FL | 21 | $265,533 | 8.3% |
| 5 | TD Bank | Wilmington | DE | 17 | $198,941 | 8.6% |
| 6 | United Midwest Savings Bank | De Graff | OH | 16 | $431,250 | 7.1% |
| 7 | JPMorgan Chase Bank | Columbus | OH | 15 | $153,933 | 6.8% |
| 8 | M&T | Buffalo | NY | 15 | $148,300 | 7.3% |
| 9 | Wells Fargo | Sioux Falls | SD | 14 | $325,450 | 8.2% |
| 10 | Newtek Small Business Finance | Lake Success | NY | 13 | $1,039,462 | 7.8% |