Funding the premises: buying the freehold you trade from, purchasing from your landlord, or refinancing what you own.
Indicative terms
- Commonly up to 75% of market value for a trading pharmacy
- Terms typically to around 25 years
- Owner-occupier assessed on the pharmacy’s trading performance; investment assessed on rent and covenant
- Contract-backed income is viewed positively and can improve both the amount and the pricing
The commercial mortgage calculator gives an indicative monthly repayment and loan-to-value figure.
What makes a pharmacy building different
Lenders look at two things at once: the strength of the trading business, and what the building would be worth if the pharmacy were not in it.
A pharmacy in a purpose-built health centre alongside a GP surgery is a strong proposition on trading grounds but has narrower alternative use. A high street unit has broader alternative use but faces more competition. Neither is a problem; both affect how a lender sizes the facility.
Where the pharmacy sits adjacent to or within a medical centre, the relationship with the practice matters. A long lease and an established referral pattern strengthen the case materially.
Buying from your landlord
If your landlord is willing to sell, this is usually a good decision and frequently a straightforward funding case. You are already trading successfully from the building, so the occupancy risk a lender would normally price for is not there.
It converts rent into equity, removes lease renewal risk, and creates an asset that supports future borrowing, including a second branch.
Refinancing
Worth reviewing if the facility was arranged some years ago, if a fixed rate is ending, or if you want to release equity for a further acquisition.
Check the early repayment charge on the existing facility first. On commercial term lending it can be large enough to make an otherwise sensible move uneconomic.
Common questions
Can I buy the pharmacy business and the freehold together?
Yes. The business and the property are funded on different bases within one transaction. See pharmacy acquisition finance.
Does a short lease on my current premises affect a business purchase?
Yes, significantly. Lenders want the lease term to comfortably exceed the loan term. If the unexpired term is short, negotiating an extension before applying is usually easier than after.
Can I hold the property separately from the trading company?
Yes, and many owners do for succession and tax reasons; take accountancy advice on the right structure for you. It changes the lending basis from owner-occupier to investment, so flag the intended structure early.
What if there is a flat above the pharmacy?
Many high street pharmacies have residential accommodation above. If the flat is let to a tenant or used as part of the business, the property is normally funded on a commercial basis. If you or a close family member will live in it and it makes up 40% or more of the property, the loan may fall within regulated mortgage rules, which is outside what we arrange. Tell us how the flat is used at the outset so the case is placed correctly.
All figures are indicative and subject to lender assessment, your circumstances, valuation and prevailing market conditions. Commercial mortgages and unregulated bridging loans are not regulated by the Financial Conduct Authority. Property offered as security may be at risk if you do not keep up repayments.