Loan breaches soar thanks to price disclosure

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Price disclosure has resulted in an “alarming” increase in loan breaches, says financial services provider

Mark Churchill, managing director of Allfin Financial Services, says that continued tough times in pharmacy could cost many pharmacists their businesses.

“We are expecting there to be a flux of breaches across the pharmaceutical industry at the end of this cycle.

“Some of our clients have reported shortfalls of up to $150,000 in a 12-month period,” Mr Churchill says.

He says there has been a worrying increase in the incidence of covenant breaches on loans, causing banks to raise interest rates by up to 2%, or request a revaluation of the pharmacy.

If a pharmacy’s LVR then extends beyond 80%, the bank may ask the owner to pay back large sums of debt or exit the bank, he says; at worst, there is a “very real” threat of the bank acting to repossess the pharmacy.

“We’re getting more involved in reviewing client covenants, because we want to help them avoid these scenarios,” Mr Churchill says.

He warns that if an owner is having difficulty meeting repayments, it is much better to approach the lender with a solution rather than a problem.

The most common predicament is when pharmacists are carrying too much debt, he says.

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