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    Bank Loans Help Keep Pharmacies in their Towns

    The needs that small pharmacies have—and how they are being met

    According to a recent report by the National Community Pharmacists Association (NCPA), the top two concerns most pharmacists have when opening their own stores are how much money they will need and how long it will be before they start to realize a profit.

    That was certainly the case when Ryan LaVarnway, RPh, was considering purchasing his first pharmacy in 2013. A native of the area, he had worked for Walgreens as a pharmacist for 15 years and earned his MBA. His goal was to move up in management, but the reality of uprooting his young family to follow promotions within the company was not appealing.

    He was interested in transitioning to a community pharmacy and found Brooks Pharmacy for sale in Hamburg, NY, outside of Buffalo, which had been in business for 65 years. LaVarnway recalls that he liked what he saw, but went looking for a loan with some trepidation.

    Related article: The State of Independent Pharmacy

    “At the end of the day, if you need hundreds of thousands of dollars and you don’t have it, you’re dead in the water,” he explains. “When I decided to go down this path, I found that there is opportunity out there and you don’t have to have a million dollars in the bank.”

    LaVarnway got his financing from Live Oak Bank, which touts itself as the largest investor in community pharmacies. It has loaned close to $750 million within the industry since 2010.

    “Live Oak Bank has historically been a lender to pharmacies specializing in government-guaranteed lending through the U.S. Small Business Administration programs,” says Jimmy Neil, general manager of pharmacy lending. “We focus on acquisitions, refinancing of debt, working capital expansions, and commercial real estate for pharmacies.”

    In April, the North Carolina-based financial institution introduced its no-money-down capital finance lease program that bundles equipment, installation, and maintenance costs into one solution. In addition to predictable payments, borrowers are also allowed a $1 buyout at the end of the lease term. The bank also helps match its customers with the vendor that best meets their needs, managing equipment from delivery to disposal and maximizing their return on investment.

    Neil says Live Oak Bank is willing to go above and beyond other lenders to offer favorable terms to community pharmacists. He points out that while most leasing companies offer 60-month terms, “we understand that there is automation and equipment that has a useful life of more than five years, so we’re able to take the terms beyond 60 months—in some cases up to 96 months—and that helps with cash flow.”

    Related article: Are community pharmacists an endangered species?

    In mid-June, LaVarnway opened a second independent pharmacy in Attica, NY, his hometown, that has been well received. He says financing his dream has been relatively easy.

    “If it’s something you really want to do, it’s really not that difficult as long as you have a solid financial head on your shoulders,” he concludes. “The bank will do their due diligence to make sure that the deal makes sense from a cash flow standpoint. It’s something you can get into without having to have a ton of money down as long as you’re willing to work hard and put in the effort it takes to grow the business.”

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