Common Challenges In Getting A Loan For A Medical Shop

The medical shop business is one of India’s most lucrative and essential sectors. With a growing population, increasing health awareness, and rising demand for medicines and healthcare services, the medical shop business has immense potential to generate revenue and profits. The medical store also contributes to the nation’s GDP, export revenues, and employment opportunities. However, starting or expanding this business is not an easy task. Medical shop investment is substantial. It also requires infrastructure, technology, inventory, marketing, and legal compliance. Many aspiring or existing medical shop owners face various challenges in securing adequate and timely business financing. Here, we will discuss some common challenges in getting a loan for a medical shop in India and how to overcome them.

Key Challenges Associated With Obtaining a Shop Loan for Medical Business

Challenge 1: Collateral Requirements

Collateral is a worthy asset or property you pledge to a business loan lender as a security for a medical store loan. It acts as a guarantee that you will repay the credit as per the agreed terms and conditions. If you fail to do so, the lender has the right to seize and sell your collateral to recover the shop finance amount.

Traditional MSME loan lenders’ basic requirement for medical store loans is collateral as it reduces their risk and ensures their recovery. They also use collateral to determine your loan amount, interest rate, and tenure. The higher the value of your collateral, the lower the interest rate and the longer the small business loan tenure you can get.

Providing collateral for a loan for a medical shop can be challenging and risky for small and medium medical store owners. Here are some reasons why:

• You may not own any property or asset you can use as collateral, or your collateral may not match the term loan lender’s criteria or valuation.
• You may have to pay for the valuation, registration, insurance, and maintenance of the collateral, or you may have to deal with legal and procedural issues related to the collateral.
• Suppose you cannot repay the online business loan for any reason, such as business loss, market downturn, or personal emergency. In that case, you may have to forfeit your collateral to the working capital loan lender, which may devastate your personal and professional life.

Tip to overcome this hurdle:

If you are looking for a loan that does not require collateral, you can opt for unsecured business loans. These are loans that are given without any collateral or security. They are based on your creditworthiness, business performance, and repayment capacity.

Challenge 2: Regulatory Hurdles

Wondering how to open a medical store? To open and run a medical shop in India, you need to obtain various licenses and permissions from different authorities, such as:

• The Drug Controller General of India (DCGI)
• The State Drug Control Authority (SDCA)
• The Pharmacy Council of India (PCI)
• The Bureau of Indian Standards (BIS)
• The Goods and Services Tax (GST) Department
• The Municipal Corporation
• The Fire Department
• The Pollution Control Board
• The Food and Drug Administration (FDA)

The eligibility for opening a medical store can vary from state to state and can be time-consuming and pricey to comply with. They can also affect your eligibility and approval of a loan application, as lenders may ask for proof of these licenses and permissions before sanctioning the medical shop loan.

Tips to overcome this hurdle:

• Do your research to determine the exact requirements and procedures for getting the necessary licenses and permissions for your medical shop and how long they may take.
• Prepare and maintain all the required documents and records related to your medical shop.

Challenge 3: Limited Credit History

Credit history records your past and present borrowing and repayment behaviour. It reflects your creditworthiness and reliability as a borrower. Lenders use your credit history to assess your capacity and readiness to repay the loan and determine the loan’s interest rate and terms.

However, as a medical shop owner, you may have limited credit history because of various reasons, such as:

• You may have borrowed money from informal sources, such as friends, family, or moneylenders, and hence have no credit history with the formal financial system.
• You may have defaulted or delayed your previous FlexiLoans loan repayments and hence have an adverse credit history that lowers your credit score.
• You may have applied for multiple loans or credit cards in a short period and hence have a high credit utilisation ratio that reduces your credit score.

Having a limited credit history can make it difficult for you to get a loan for a medical store, as lenders may perceive you as a risky and unprofitable customer and may refuse your loan application or charge you a higher interest rate and impose stricter terms and conditions on the loan.

How to grow a medical store business by overcoming these challenges? Here are some ways:

• Check your credit report and score regularly. Rectify any errors or discrepancies that may affect your credit history. You can obtain a free credit report once a year from any of the following credit bureaus in India: CIBIL, Equifax, Experian, and CRIF High Mark.
• Maintain good credit habits, such as paying your bills and EMIs on time, maintaining a low credit utilisation ratio, avoiding multiple loan or credit card applications, and diversifying your credit mix.
• Apply for secured financing, such as a gold loan, a loan against the building, or a loan against a fixed deposit, where you can pledge an asset as collateral to get a loan for a medical shop. 

Challenge 4: High Competition

The medical shop industry is one of India’s most competitive and crowded sectors, with thousands of pharmacies operating across the country, both online and offline. Some factors that contribute to the high competition are:

• The low entry barriers and high demand for medicines and other medical products attract new entrants and existing players to the market.
• The price sensitivity and bargaining power of the customers, who can easily switch to cheaper or better alternatives available in the market
• The presence and influence of large and established players with economies of scale, brand recognition, and loyal customer base
• The regulatory and legal restrictions and interventions, such as the Drug Price Control Order (DPCO), the National Pharmaceutical Pricing Authority (NPPA), the Essential Commodities Act (ECA), etc., which limit the pricing and profit margins of the medical shop owners

The high competition can affect the market share and customer loyalty of your medical shop business and your government loan for medical store repayment potential. Lenders may consider the competitive risks and pressures while evaluating your loan application and may require you to demonstrate your competitive edge and differentiation in the market.

Here are some tips to overcome this hurdle:

• Carry out a detailed analysis of your medical shop business’s competitors and their performance to determine their weaknesses and strengths and evaluate the potential opportunities and threats they may pose to your business.
• Create a distinctive value proposition and positioning statement for your medical shop business, and communicate it clearly and consistently to your target customers and stakeholders. 
• Implement a customer-centric and service-oriented approach for your medical shop.

Challenge 5: Inventory Management

Another challenge you may face in getting a loan for a shop is the inventory management of your medical store business. Inventory management is planning, organising, and controlling the stock of medicines and other medical products you buy in stores and sell in your medical shop. Inventory management is crucial for your medical shop business, as it affects your business’s cash flow and working capital.

However, inventory management can be challenging for your medical shop business due to various reasons, such as:

• The high cost and low availability of medicines and other medical products can increase procurement and storage expenses and reduce profit margins.
• The short shelf life and expiry date of medicines and other medical products can lead to wastage and inventory loss, affecting your sales and customer satisfaction.
• The demand and supply fluctuations of medicines and other medical products can create inventory imbalances, such as overstocking or understocking, and affect your service level and inventory turnover.
• The theft and pilferage of medicines and other medical products can reduce inventory and revenue and increase security and insurance costs.

These challenges can affect the profitability and sustainability of your medical shop business and your ability and willingness to repay the loan for the shop. Lenders may consider the inventory risks and costs while evaluating your pharmacy loan scheme application. They may also require you to demonstrate your inventory management skills and efficiency while presenting a medical shop business plan.

Here are some tips to overcome this hurdle:

• Conduct a regular inventory audit and analysis of your medical shop business, and identify the inventory levels, costs, and performance of your medical shop.
• Implement an inventory management system and software for your medical shop business, and automate and streamline your inventory processes and functions.

Conclusion

The medical shop business in India is a promising and vital sector, but it poses many difficulties for those wanting to start or expand it. One of the main difficulties is getting a pharmacist loan scheme, as lenders often demand high collateral, complex documentation, and strict repayment terms. Moreover, medical shop owners have to deal with the challenges of complying with various regulations, building a good credit record, managing their inventory, and competing with other players in the market. Medical shop owners can succeed despite these obstacles with smart planning, hard work, and creativity.