Deposit Required When Buying A Pharmacy

Question:

Expert Response

This is a good question and one that often comes from young pharmacists looking to buy into their first pharmacy. It is also an important question given our current economic environment and the greater costs associated with funding business acquisitions.

It is a common misconception in the market place that you can acquire a business without providing any equity. This is not true.

As a general rule, if you're looking at buying a pharmacy on your own, a lending institution will lend between 60% and 80% of the value of the pharmacy (depending on your situation). So to be prepared, you should look at allowing between 20% and 40% of the business value in equity.

However, in considering purchasing a pharmacy, there are several considerations that you should be aware of. These include:

• Vendor financing options;
• Partnership finance options; and
• Ensuring you that have a financial buffer.

As an example, if you look at a partnership/vendor finance option, you are looking at buying a portion of the business now, with the option or requirement to buy out the remaining shares at a specified date in the future. In this instance, your financing would only be required to provide funds for the percentage you are acquiring now. However, the funds are still acquired against the business as a whole - meaning you can often borrow 100% of you acquisition as long as the LVR of the business is within the lending terms of the financial institution.

Above all, remember that there may be a downturn in the business. So ensure you have sufficient funds available to assist you in situations of negative growth or business losses.

For more information regarding structuring your finance for a pharmacy acquisition, please contact Medici Capital Finance on 03 9853 7933. If you are looking to buy a pharmacy, please contact Anthony Cutinelli from Attain Business Brokers on 03 9853 7431 for Melbourne, 02 8667 3276 for Sydney or 07 3112 2913 for Brisbane.

Disclaimer: While the following response provides some insight into Capital Gains, it does not constitute advice. For specific assistance or advice, please contact Medici Capital on 03 9853 7933.