Inside: Make your pharmacy look like a great investment with a polished pharmacy loan package.
Loans backed by the U.S. Small Business Administration have a lot of perks. They’re a flexible financing option for small businesses like your pharmacy, and they often offer lower interest rates than other lines of credit.
There are a lot of reasons you might consider taking out an SBA loan for your pharmacy— to start a pharmacy, to expand to a new location, to buy inventory, and more.
However, the process of seeking an SBA loan is complex, and approvals can take a long time.
You don’t apply directly to the SBA when you’re seeking one of these loans. Instead, you apply to individual lenders. The SBA then partially guarantees those loans to reduce risk on the lender’s side. But no matter who your lender is, you’ll need to prepare an excellent loan package that demonstrates what your pharmacy does, why you’re seeking a loan, and how you plan to pay the loan back.
Read about the essential parts of an SBA loan package and how to make your pharmacy stand out on paper.
Statement of Purpose
Your statement of purpose may also be called an “executive summary.” It’s the first thing your lender is going to see, so it’s important that this document is polished and informative.
This document should include information about the pharmacy loan you are seeking. Your lender will want to see this information about the potential loan in your statement of purpose:
- The amount you are seeking
- The purpose of the loan
- Duration and terms of repayment
- Any available collateral
In addition to details about your loan, you should also include a description of your business. It doesn’t have to be lengthy, but it should explain the history of your pharmacy and what positive effects you expect to see when you get your pharmacy loan.
Finally, because SBA loans require the owners to have equity in their business, you’ll describe the investments that you and any co-owners have made in the pharmacy.
Business Plan
To add credibility to your loan application, a comprehensive business plan is a must. Most lenders won’t even consider giving you a loan without one.
You probably created a business plan when you first started your pharmacy, but if it’s been a few years, you might need to update it before including it in your loan package. As a refresher, there are two main types of business plans: traditional and lean startup. A lean startup plan is more streamlined, usually only a single page. An SBA loans require more comprehensive information, so you’ll want a traditional format.
If your business plan is dozens of pages, you don’t necessarily need to include the whole thing in your loan package, but certain excerpts should be included:
- Vision statement and description of your pharmacy
- Market definitions and analysis
- Description of the products and services you provide
- Overview of your pharmacy operations and management
For tips on how to craft the perfect business plan for your SBA loan package, visit the SBA website.
Financials
Lenders want to guarantee that you will be able to pay back your loan, so detailed financial statements are a critical part of your loan package. They let your lender know about your pharmacy’s financial history and its potential for the future.
Your package should include four different types of financial statements:
- Cash flow statement
- Income statement
- Balance sheet
- Personal financial statement
Click on the hyperlinks below to find Microsoft Excel templates for each of these statements from the SBA.
- Cash Flow Statement: This helps a lender determine how much cash you have coming in and going out on a monthly basis. If you have negative cash flow, that tells lenders you might not be able to make loan payments. Your loan package should include 12 months of cash flow statements as well as 6 months of projected statements.
- Income Statement: Also known as a profit and loss statement, this is a measure of the profit your pharmacy has made over a period of time, usually six months to a year. If your pharmacy is well established, you should include income statements for the past three years in your loan package. If your pharmacy is new, include a projected income statement for the next 12 months.
- Balance Sheet: This statement measures your net worth by weighing your assets against your liabilities. Net worth gives lenders a picture of your pharmacy’s overall financial health. Like your income statement, you should include three years of balance sheets if you’re pharmacy is well-established and a twelve-month projection if your pharmacy is new.
- Personal Financial Statement: Because you have also invested money into your pharmacy, your lender will also want a picture of your personal finances. This will take into account your personal debts and assets and helps a lender determine whether you are going to be a reliable lendee.
Finishing Touches
Simply assembling all the necessary parts of an SBA loan package doesn’t guarantee you’ll get a loan. The finishing touches can push your package to the next level.
In addition to neatly presenting all of your required statements and documents, throughout your loan statement, you should weave together the story of your business. By demonstrating knowledge in your field, competence as a leader, and passion for your work, you will be more likely to convince a lender that you are a worthwhile investment.
Throughout your pharmacy loan package, emphasize that lenders will get their money back, using honest financial projections to back up your claims.
Finally, don’t forget the small stuff. Spelling and grammatical errors in your loan package make you look unprofessional, causing lenders to hesitate.
If your loan request gets rejected the first time, don’t just turn around and apply to another lender. Assess your loan package for weak points and work to improve it, making your pharmacy as appealing on paper as possible.
For more information on how to prepare a loan package, check out the Small Business Administration’s online course.
A Member-Owned Company Serving Independent Pharmacies
PBA Health is dedicated to helping independent pharmacies reach their full potential on the buy-side of their business. Founded and owned by pharmacists, PBA Health serves independent pharmacies with group purchasing services, wholesaler contract negotiations, proprietary purchasing tools, and more.
An HDA member, PBA Health operates its own NABP-accredited secondary wholesaler with more than 6,000 SKUs, including brands, generics, narcotics CII-CV, cold-storage products, and over-the-counter (OTC) products — offering the lowest prices in the secondary market.
