Pharmacy Franchise Financing in Iowa

By Brad MacLiver
Authorship and Profile at Google

An Iowa (IA) 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 Iowa 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., created by the Pharmacy Franchisor.

There are a number of options for financing a pharmacy franchise business. All Iowa pharmacy franchise funding sources, for drug stores, prefer lending to a pharmacy franchisee who will be working with a nationally recognized name and long track records. Newer pharmacy franchise models won’t possess these two traits and will be considered more risky.

Traditional Bank Financing can be used to finance pharmacy franchise in Iowa when the pharmacy franchise has the track record and some pharmacy name recognition. Many banks show interest in a funding opportunity of this type. However, after the bank reviews the loan documents, many of these banks reject the funding request because they don’t understand the security provided for the pharmacy loan. Community drug stores typically have very little traditional assets to offer as security. Lenders for the pharmacy in Iowa 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.

IOWA Pharmacy Franchise Funding Tips:

1. Because there are many pharmacy franchise financing options available, Iowa 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 Iowa pharmacy consulting services and franchise associations who can help guide a prospective pharmacy franchisee or borrower or a drug store loan.

4. New Iowa 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.

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When pharmacy owners have questions and need information regarding pharmacy franchise business loans, other types of funding for community drug stores and pharmacies, or require a pharmacy valuation they should contact a pharmacy industry specialist who understands both the national and Iowa pharmacy markets and can therefore provide quality answers and sound advice.

When you contact www.PharmacyValuations.com you can receive a free pharmacy valuation plus discuss the options available to you without any cost or obligation.

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Topics include:

Selling a Pharmacy, Buying a Pharmacy, Financing a Pharmacy, Board of Pharmacies, Consulting and Advisory Services, FAQs, Pharmacy Market Conditions,  Marketing, Medicare’s effect on Pharmacies, U.S. Pharmacy Associations, Pharmacy Business Valuations, Referral Fees, Tax Advantages and Tax Strategies for Pharmacy Owners who are considering selling their business.