Financing Maryland Pharmacy Franchises

By Brad MacLiver
Authorship and profile at Google


A MD pharmacy franchise is a contractual relationship between two parties. One, the Maryland 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 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 Maryland 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 in Maryland 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 pharmacy loan. Community drug stores will typically have few traditional assets to present as security. Lenders for Maryland pharmacies will use traditional methods for analyzing available cash flow to service to the debt, but must also need to understand that nontraditional collateral will secure the loan.

For borrowers, even incorporated ones, the independent drug store owner’s personal credit rating, tax returns, and financial statements will be a factor. The amount of cash on hand as well as the verification of the source of the down payment are critical factors in qualifying for a pharmacy business loan.

MD Pharmacy Franchise Funding Tips:

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 have an accountant or attorney that is familiar with Maryland pharmacy franchise financing to review the pharmacy business loan documents.

3. There are pharmacy consulting services and franchise associations who can help guide a prospective pharmacy franchisee or borrower or a drug store loan.

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

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