Financing Pharmacy Franchises in New Jersey

By Brad MacLiver
Authorship and profile at Google


A NJ pharmacy franchise is a contractual relationship between two parties. One, the Pharmacy Franchisor in New Jersey 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., created by the Pharmacy Franchisor.

There are a number of options for financing a New Jersey 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 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 New Jersey 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 New Jersey.

Tips for NJ Pharmacy Franchise Funding:

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 consult either an attorney or accountant familiar with financing pharmacy franchises and have them review the pharmacy business loan documents.

3. To help guide a prospective New Jersey pharmacy franchisee or borrower for a drug store loan, there are pharmacy consulting services and franchise associations available.

4. New pharmacy owners in New Jersey need to ensure that their funding request is enough to get the pharmacy running and profitable. Funding that is less than ample for the initial stages potentially put the drug store in a position of needing more funding. It will be more difficult to obtain smaller working capital loans that would be in a subordinated position at a later date.

When NJ 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 New Jersey pharmacy industry specialist who can provide quality answers and sound advice.

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