Pharmacy Franchise Financing in Colorado

By Brad MacLiver
Authorship and profile at Google


A Colorado pharmacy franchise 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., that were created by the Pharmacy Franchisor.
 

There are several options for financing pharmacy franchise businesses in Colorado. All sources for pharmacy franchises or drug stores prefer lending to a pharmacy franchisee who will be working with a nationally recognized name with long track records. Newer pharmacy franchise models do not possess these two traits and will thus be considered more risky.

When a pharmacy has pharmacy name recognition and a long track record, traditional Bank Financing for funding a pharmacy franchise is available. Several banks will show interest in a funding opportunity of this type, but once the bank reviews the loan documents, many of these banks may decline the funding request because they don’t fully comprehend the security provided for the pharmacy loan. Typically, community drug stores have very few traditional assets to offer as security. Lenders for pharmacies in Colorado will use traditional methods for analyzing the cash flow available to service to the debt, and they will also need to understand the nontraditional collateral that will secure the loan.

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

CO Pharmacy Franchise Funding Tips:

1. Because there are many pharmacy franchise financing options available, pharmacy owners should perform proper due diligence then obtain the pharmacy funding that best suits their situation.

2. It is advisable to have an accountant or attorney that is familiar with pharmacy franchise financing to review the 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 Colorado 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 pharmacies, they should contact a CO pharmacy industry specialist who can provide quality answers and sound advice.

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