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Have you considered your financial position before buying a pharmacy?

The pharmacy market remains strong; however an important part of buying a pharmacy is preparing your financial position. Before looking to buy a pharmacy, make sure you take a moment to assess how you are going to fund the purchase. Understand the costs involved, how much equity you have to contribute and how much the bank is going to lend. This will ensure that the purchase progresses smoothly once you have found a pharmacy that you are keen to buy.

The pharmacy market remains strong; however an important part of buying a pharmacy is preparing your financial position. Before looking to buy a pharmacy, make sure you take a moment to assess how you are going to fund the purchase.

Contrary to industry rumours, pharmacy prices have remained stable. And high prices are being paid for good opportunities - particularly in situations were there is clear and present opportunity in a site. As a result of the strength of the market, it is likely that the price you pay for a pharmacy will be different to the value a valuer assigns to that business (see my previous blog entry: Why would the valuation differ from the market price?). So make sure you understand the cost impact of what you are getting into.

Be advised that financiers will base their lend against the lower of the value or market price of the business. As such, you may be required to provide additional equity as part of the transaction to complete the purchase. Have you considered the impacts of this when making an offer on a business?

At a minimum, when considering purchasing a pharmacy, take into consideration the equity required under normal lending conditions, then add a buffer for costs of completing the sale (such as valuation fees, loan establishment fees, stocktaking fees and solicitor fees) and a further buffer for variations between the valuation and the market price. This will ensure that you have contingencies should your calculations be out.

If possible, seek the advice of an experienced pharmacy adviser who can assist you in determining your funding requirements and planning for a pharmacy purchase. Paying a small amount for professional advice is likely to save you from losing your deposit if a sale falls through!

For more information about the finance requirements for buying a pharmacy, please contact us on 1300 ATTAIN (1300 288 246).

 

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