You own a pharmacy and want to expand to multiple locations. You think to yourself getting financing will be easy as I have one successful business and already received funding for the first one. Know this, it isnâ€™t that easy.
Regularly we have owners who have already found their second pharmacy to purchase or have a great start up opportunity but cannot get the project funded. I am sure you are thinking, they must not have a very good first business. Wrong! They have great businesses but either have poor financials that do not reflect how good their businesses are or they have â€œhiddenâ€ cash for taxes purposes.
When expanding your business whether through additional locations or simply getting capital to add a compounding lab the bank looks at your global cash flow inclusive of the new debt. We see regularly owners maxing their 401kâ€™s, buying robots, giving bonuses, etc and then their cash from year to year looks lower than what it really is and the bank cannot fund the new project.
So remember if your plans include expanding your operation and you will require capital, find a good accountant, get proper financials and when making decisions think about your free cash flow as it is represented on your tax return.