For pharmacists suffering the consequences of PBS changes, help is at hand.
As a direct result of the government’s controversial changes to the Pharmaceutical Benefits Scheme, many pharmacists are facing tough times ahead that could cost them big money, or worse, their business.
Pharmacists are receiving significantly less for dispensing medications, which leaves them in the very difficult position of trying to maintain their levels of service to the community with less cash flow.
“As specialists in financing the pharmaceutical industry, Allfin Financial Services understands the major market shift caused by the PBS reforms is hurting everyone. Some of our clients have reported shortfalls of up to $150,000 in a 12 month period,” said Mark Churchill, Managing Director of Allfin Financial Services.
There has been an alarming increase in the number of covenant breaches on loans. When a client is in breach, banks have a number of options. They could raise your interest rate by as much as 200 basis points (2%). They could request a valuation of the pharmacy – and in this market, where future maintainable earning are likely decreasing, a re-valuation is unlikely to work out in your favour. If your LVR then extends beyond 80%, the bank may ask you pay back large sums of debt or exit the bank. At worst, there’s the very real threat of the bank acting to repossess your pharmacy.
“We’re getting more involved in reviewing client covenants, because we want to help them avoid these scenarios. If we uncover a breach, we can then work with them to develop a solution that will be achievable for them and acceptable for the banks,” said Mr Churchill.
“By doing the calculations internally, we can work through all the options before speaking to the bank. We know the parameters of each bank and how far we can stretch them. If we suspect there will be a serious issue with the incumbent bank, we will find a way to switch to another without penalty.”
It’s much better to go to the bank with a solution, rather than a problem.
The most common predicament is when pharmacists are carrying too much debt. A broker can conduct a holistic review and recommend a strategy to either reduce or consolidate your borrowings.
It’s important to take the initiative. Good brokers go with the client to the bank to acknowledge the breach. Being prepared with a viable solution speeds up the process significantly, as the loan manager can simply send it to their credit manager for approval.
“Having focussed on the pharmaceutical industry for 10 years, we were able to anticipate the impact the PBS reforms. We prepared our clients by negotiating covenants that are realistic and achievable under this financial pressure,” Mr Churchill said.
“We are expecting there to be a flux of breaches across the pharmaceutical industry at the end of this cycle. If you think you are in trouble, please don’t make any decisions until you have spoken to the team at Allfin. We know our way around your industry and ours.”
For more information, please contact Mark Churchill on 0488 956 525.