When assessing a pharmacy purchase, lenders are not just looking at the headline price. Their decision is driven by affordability, sustainability, scope for growth and ultimately how well the Business is set up for long-term success.
Understanding what lenders really care about allows buyers to sense-check opportunities early and avoid wasting time on proposals that are unlikely to be funded.
Cash is king
At the heart of every lending decision is cash flow. Lenders want confidence that the Pharmacy can comfortably service borrowing while still supporting reinvestment and personal income.
They will closely assess:
- EBITDA and how it has been calculated
- Locum and staffing costs
- Consistency of income streams
- Fixed and Variable costs
- Buyers’ drawings requirements
Affordability and debt servicing
Lenders apply stress tests to ensure repayments remain affordable even if conditions change. This includes reviewing:
- Gross Profit margin
- Debt service coverage ratios
- Personal drawings and lifestyle costs
- Existing personal and business liabilities
A proposal may initially look attractive on paper but fail lender affordability tests once these factors are applied.
Dispensed items, OTC Sales and enhanced services
The income mix of a pharmacy plays a major role in lender appetite and deal structure. While NHS FP34 income offers a level of stability, lenders will also examine:
- Average number of NHS items dispensed per month
- Location of nearby GP surgeries and % of items transacted via the subject Pharmacy
- Location of competition
- Private and over-the-counter income growth
- Enhanced services and arrangements with local Care and Nursing homes
Understanding how lenders view different income streams helps buyers align expectations early in the process.
Structure matters as much as price
Loan term, Short term commitments, Repayment profile, security structure and ongoing covenants all affect affordability. A well-structured facility can:
- Reduce monthly pressure
- Improve cash flow flexibility
- Support future growth or exit plans
This is why the cheapest rate may not always the best outcome.
Common deal red flags
Certain issues consistently slow approvals or result in revised terms late in the process:
- Overstated profits or one-off income
- Under market staffing or locum costs
- Short lease lengths or restrictive lease clauses
- Unclear succession or exit plans for the current owner
Identifying these early allows buyers to renegotiate or step away before time and costs escalate.
Thinking like a lender
The most successful buyers learn to view deals through a lender lens. This leads to better decisions, stronger offers, and smoother completions.
Understanding the numbers that matter is not about becoming a finance expert. It is about knowing enough to buy with confidence and clarity.
We are able to source a wide range of innovative and competitive Healthcare Finance packages specifically tailored to, and for, Healthcare Professionals such as:
Remember!
You are in a specialist market so use a specialist broker who understands your sector. With access to major banks and specialist niche healthcare lenders, we know the types of proposals that are synonymous with this sector.
