Pharmacy finance

Who pharmacy finance is for

We work with pharmacists buying their first pharmacy, with multiple operators consolidating and acquiring additional branches, and with owners refinancing to release equity or improve their terms. Whether you are a locum or second pharmacist stepping up to ownership for the first time, or an established operator adding to a group, the funding question turns on the same things: the dispensing income, the profitability and the goodwill in the business.

Community pharmacy is a resilient sector for lenders because so much of the income is NHS backed and recurring. That underpins the appetite of specialist lenders to support a meaningful share of a purchase price, and it is why pharmacy is treated differently from ordinary retail when a lender assesses a deal.

EBITDA-based valuation and dispensing income

Pharmacy businesses are usually valued on a multiple of EBITDA, earnings before interest, tax, depreciation and amortisation, with the multiple reflecting the size, location and quality of the dispensing book. The bulk of that value is goodwill, the worth of the established patient base, the NHS dispensing contract and the trading reputation, rather than physical assets. Lenders are comfortable advancing against goodwill in pharmacy precisely because the income behind it is so durable.

The NHS dispensing contract income is the heart of the assessment. Lenders look at prescription volumes, the dispensing and service income, the stability of the local patient base and any clustering risk where several branches sit close together. A pharmacy with high, settled prescription numbers and a clean trading record is a strong proposition. We package the income and the EBITDA story so the lender can see clearly what supports the goodwill they are being asked to fund.

Types of pharmacy finance and how they fit

We arrange several types of pharmacy finance, and most deals blend more than one. The most common is acquisition, funding the goodwill and, where there is a freehold, the premises, for a first purchase or a bolt-on to an existing group as part of a consolidation strategy. We also arrange refinancing, to release equity, restructure existing debt or move off an expiring facility. Where the pharmacy business trades from a freehold building, commercial mortgages sit at the centre of the funding, with pharmacy mortgages of this kind run over a long term against the property and the dispensing income.

Around the core mortgage, other options fill the gaps. A secured business loan can fund a goodwill-led acquisition where there is no freehold, an unsecured business loan or a short finance unsecured facility can cover working capital and smaller needs, and asset finance can fund robotics, fit-out and equipment for a branch. The right blend depends on the deal, the security available and the rate each option carries, and we will set the loan structures side by side so you can compare the cost. For a small group with a head office function, we can package funding across several branches into a single, coherent facility.

Consolidation is a recurring theme in community pharmacy, and many of our cases involve an operator acquiring a second, third or further branch. We structure each facility around the deal in front of you rather than a single off-the-shelf product.

Eligibility and what lenders look for

Lenders assess the pharmacy business, its income and you. They look at the EBITDA and the trading accounts, the dispensing volumes and NHS contract income, the goodwill valuation and the premises position. From the operator they look at pharmacy experience, the track record of any existing branches, the contribution from your own funds and the strength of the business plan, particularly where the deal is part of a wider consolidation.

A stable dispensing book, clean accounts and a clear plan all strengthen a case. Because so much of the income is NHS backed, specialist lenders are often willing to support a high loan-to-value on a goodwill-led purchase, whether the funding is structured as commercial mortgages on a freehold branch or as goodwill lending with asset finance for the fit-out. We will tell you honestly where the case is strong and where a lender will want more comfort, and approach the lenders most comfortable with pharmacy.

Indicative terms

Terms vary by lender, by the pharmacy business and by the balance of goodwill and property in the deal, so these are indicative ranges rather than an offer. Goodwill-led acquisition lending for a sound pharmacy is often available at a high share of the purchase price over a term commonly in the ten to fifteen year range, while a commercial mortgage on a freehold pharmacy can run longer. The rate is priced over a reference rate and reflects the strength of the dispensing income and the overall case, and a stronger, well-evidenced business will usually attract a keener rate.

We will give you a realistic, indicative view of the rate and structure once we understand the EBITDA, the dispensing income and the premises. Some lenders on our panel are themselves authorised and regulated by the Financial Conduct Authority for their regulated activities, but the commercial pharmacy lending we arrange falls outside that. All terms are indicative and subject to status, valuation and full lender approval. Commercial finance of this kind is not regulated by the Financial Conduct Authority, and nothing here is financial advice.

How we arrange it

We start with the trading accounts, the dispensing income and what you want the funding to achieve, whether that is a first purchase, a bolt-on acquisition or a refinance. We then approach the lenders most comfortable with community pharmacy and come back with indicative terms. Once you choose a route, we package the application, work with your accountant and solicitor, manage the valuation and the lender, and keep the deal moving to formal offer and completion. You deal with us throughout.