How Long Does Pharmacy Acquisition Financing Take?
Buying an existing pharmacy can involve several moving parts, and financing is an important part of the process. For pharmacists seeking pharmacy practice financing, understanding the general financing timeline can help buyers plan ahead and avoid unnecessary delays.
There Is No Single Pharmacy Financing Timeline
The amount of time required to finance a pharmacy acquisition can vary based on the lender, financing program, purchase price, documentation, financial complexity, and transaction structure.
A straightforward transaction with complete documentation may move relatively quickly, while a more complicated acquisition can require additional review.
Step 1: Initial Financing Review
The process often begins with an initial review of the buyer and the proposed acquisition.
The lender may want to understand:
- The purchase price
- The pharmacy’s financial performance
- The buyer’s experience
- The buyer’s credit profile
- Existing debt
- The proposed use of financing
- Whether real estate or other assets are included
Getting this review started early can help identify potential financing issues before the transaction progresses too far.
Step 2: Gather Financial Documents
Once the financing process begins, the buyer may need to provide a variety of financial and business documents.
These can include:
- Personal financial information
- Personal and business tax returns
- Business financial statements
- Bank statements
- Existing debt information
- Purchase agreement or letter of intent
- Pharmacy-specific financial information
- Other documents requested by the lender
The faster these documents can be collected and organized, the easier it may be to keep the financing process moving.
Step 3: Analyze the Pharmacy
For an acquisition, lenders need to understand the financial condition of the pharmacy being purchased.
The analysis may include revenue, profitability, cash flow, expenses, inventory, accounts receivable, existing liabilities, and other relevant information.
A lender may also have questions about unusual expenses or changes in the pharmacy’s financial performance.
Step 4: Underwriting
After the necessary information has been collected, the lender can move into underwriting.
Underwriting is where the lender evaluates the overall risk of the transaction and determines whether the proposed financing structure is appropriate.
The lender may review the buyer, the pharmacy, the purchase price, projected debt payments, and other aspects of the transaction.
Step 5: Additional Questions and Revisions
Underwriting does not always happen in a straight line.
A lender may request additional documents or clarification about certain financial figures.
For example, the lender may have questions about:
- Changes in revenue
- Profit margins
- Owner compensation
- Existing debt
- Accounts receivable
- Inventory
- Purchase price
- Business ownership
Responding quickly can help prevent unnecessary delays.
Step 6: Loan Approval
Once underwriting is complete, the lender can provide an approval or term sheet outlining the proposed financing.
The buyer should review the financing terms and make sure they align with the overall acquisition.
Step 7: Closing
Loan approval does not necessarily mean the transaction can close immediately.
There may still be closing conditions to complete, including final documentation, legal review, insurance, entity formation, licensing, and other transaction requirements.
The acquisition itself may also have requirements that need to be completed before ownership can officially transfer.
What Can Slow Down Pharmacy Acquisition Financing?
Several issues can extend the financing timeline.
Common examples include:
- Missing financial documents
- Inconsistent financial information
- Complicated ownership structures
- Changes to the purchase agreement
- Questions about cash flow
- Existing debt that requires additional analysis
- Real estate included in the transaction
- Incomplete licensing or regulatory requirements
- Delays from other parties involved in the transaction
The Purchase Agreement Can Affect Timing
Changes to the purchase price or transaction structure can require the lender to revisit the financing.
If assets are added or removed, seller financing changes, real estate is added, or the ownership structure changes, additional review may be necessary.
This is one reason it can be helpful to keep the lender informed when material changes are made to the transaction.
Real Estate Can Add Another Layer
Some pharmacy acquisitions include the purchase of the building where the pharmacy operates.
When commercial real estate is included, the lender may need additional property information, valuation, environmental documentation, insurance, and other materials.
This can make the transaction more complex than financing the pharmacy business alone.
Start Financing Before the Closing Date
One of the biggest mistakes a buyer can make is waiting until the expected closing date is approaching before starting the financing process.
A buyer should allow enough time for:
- Document collection
- Financial analysis
- Underwriting
- Loan approval
- Final documentation
- Closing requirements
Starting early gives everyone more time to address unexpected issues.
How Buyers Can Help Keep the Process Moving
Buyers can take several steps to reduce unnecessary delays.
Have Financial Documents Ready
Organize tax returns, financial statements, bank statements, debt information, and other requested documents before the financing process gets underway.
Know the Details of the Acquisition
Have a clear understanding of the purchase price, assets included, ownership structure, seller terms, and other major transaction details.
Respond Quickly
When the lender requests additional information, responding promptly can help keep underwriting moving.
Keep the Deal Team Coordinated
The buyer, seller, attorney, accountant, lender, and other professionals may all have responsibilities during the transaction.
Keeping everyone informed can help prevent one delayed item from holding up the entire closing.
Don’t Assume Loan Approval Means You’re Done
Even after a loan has been approved, there may be remaining conditions before funds can be released.
Buyers should stay engaged through the final closing process and make sure outstanding requirements are completed.
Plan the Financing Timeline Around the Acquisition
Financing should be considered alongside the broader pharmacy acquisition timeline.
Due diligence, valuation, legal documentation, licensing, insurance, transition planning, and financing may all need to be completed before the transaction can close.
Final Thoughts
Pharmacy acquisition financing does not have one universal timeline.
The process can move faster when the buyer is prepared, the pharmacy’s financial information is complete, and the transaction is straightforward. More complicated acquisitions may require additional underwriting and documentation.
Pharmacists planning an acquisition should begin the financing process well before their desired closing date and be prepared to provide documents and respond to lender questions throughout the transaction.
