Financing Pharmacy Franchises in Alabama

By Brad MacLiver
Authorship and profile at Google


An Alabama (AL) pharmacy franchise are formed as a contractual relationship between two parties. The first party is the Pharmacy Franchisor who develops their drug store business model, brands the pharmacy related products, and produces the system under which the pharmacy franchisees will operate. The second party is the Pharmacy Franchisee who purchases a franchise license from the Pharmacy Franchisor and typically pays an ongoing pharmacy franchise fee, or royalty fees, to use the products, name, systems, trade secrets, etc., created by the Pharmacy Franchisor in Alabama.

There are a number of options for financing a pharmacy franchise business. All 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 Alabama pharmacy franchise models won’t possess these two traits and will be considered more risky.

Traditional Bank Financing used in funding a pharmacy franchise is available when a pharmacy franchise has the track record and pharmacy name recognition. Many of the banks will show interest in this type of funding opportunity. Unfortunately once the bank reviews the loan documents, many of these banks decline the funding request because they don’t understand the security provided for the Alabama pharmacy loan. Community drug stores typically have very little traditional assets to offer as security. Lenders for pharmacy 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 in Alabama.

AL Pharmacy Franchise Funding Tips:

1. Because there are many pharmacy franchise financing options available, Alabama 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 in Alabama who can help guide a prospective pharmacy franchisee or borrower or a drug store loan.

4. New 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 in AL have questions and need information regarding pharmacy franchise business loans, or any types of funding for community drug stores and pharmacies, they should contact an Alabama pharmacy industry specialist who can provide quality answers and sound advice.

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