The easiest way to fund your fit out

What Fit Out Finance Covers

Fit out finance is a type of asset finance designed to fund the cost of transforming a commercial space into a working environment. It covers joinery, partitioning, lighting, flooring, built-in fixtures, kitchen installations, reception areas, and tenant-specific improvements. Rather than paying upfront, you spread the cost over a set term with fixed monthly repayments while the fit out itself serves as collateral.

Consider a physiotherapy clinic moving into a shell space on Bettington Road. The fit out includes treatment rooms, a reception counter, soundproofing, medical cabinetry, and disability access modifications. Total cost sits at $85,000. Using fit out finance, the business preserves $85,000 in working capital, pays around $1,800 per month over five years, and claims depreciation on the fit out from day one. The finance is structured as a chattel mortgage, meaning the business owns the fit out outright and can claim GST input credits on the total loan amount at settlement.

Fit out finance is not the same as equipment finance. Equipment finance typically covers movable assets like computers, machinery, or vehicles. Fit out finance covers permanent or semi-permanent improvements attached to the property. The distinction matters because the security, depreciation rate, and lender appetite differ. Some lenders will combine both into a single facility if you are fitting out a space and purchasing office equipment at the same time.

How Fit Out Finance Differs From a Standard Business Loan

Fit out finance uses the fit out itself as security, which means the loan amount is tied directly to the value of the work being completed. A standard business loan may be unsecured or require a director's guarantee, and the funds can be used for any purpose. Fit out finance is asset-based lending, which often results in a lower interest rate because the lender holds a registered interest in the improvements.

In our experience, businesses using fit out finance also benefit from clearer GST treatment. With a chattel mortgage or hire purchase structure, you can claim the GST component of the entire loan amount in your next Business Activity Statement, rather than waiting to claim GST on each repayment. This improves cashflow in the first quarter after settlement.

Another difference is the approval process. Lenders will typically require a scope of works, quotations from contractors, and a timeline. They may also require progress claims if the fit out is staged. This is less common with general business finance, where funds are released in a lump sum without reference to how they are spent.

Chattel Mortgage vs Hire Purchase for Fit Outs

A chattel mortgage allows your business to own the fit out from day one while the lender holds a mortgage over it. You claim depreciation, input tax credits, and interest as deductions. At the end of the term, the fit out is yours outright with no further payments.

Hire purchase works differently. The lender owns the fit out until the final payment is made. You claim the repayments as a business expense rather than depreciation. Input tax credits are claimed progressively on each repayment instead of upfront. Ownership transfers only after the last payment.

For most Northmead businesses, a chattel mortgage delivers stronger tax benefits and earlier access to GST credits. The exception is if your accountant advises that progressive deductions align with your current profit structure, or if you prefer not to show the asset on your balance sheet during the loan term.

Structuring Repayments to Match Your Cashflow

Repayment terms for fit out finance typically range from three to seven years depending on the asset's useful life and your business needs. Fixed monthly repayments allow you to manage cashflow without surprises, particularly if your business has seasonal revenue fluctuations.

Some lenders offer a balloon payment structure, where you make lower repayments during the term and pay a lump sum at the end. This reduces monthly outgoings but requires planning for the final payment. A balloon payment can work if you expect to refinance at the end of the term or if you plan to sell or relocate the business within that window.

You can also structure the loan to align with your lease term. If you are signing a five-year lease on a commercial space in Northmead, matching the finance term to the lease avoids carrying debt on improvements you may not be able to take with you. This is particularly relevant for fit outs in retail or hospitality, where landlords may negotiate a lease extension based on the capital you have invested in the space.

Using Vendor Finance for Faster Approval

Some fit out contractors and shopfitters offer vendor finance, where the supplier arranges the funding directly. This can speed up the approval process and reduce the documentation required, but the interest rate is often higher than going through a broker who can access asset finance options from banks and lenders across Australia.

Vendor finance is worth considering if you need to start the fit out urgently and do not have time to compare lenders. It is less suitable if you want to structure the loan for optimal tax treatment or if you are bundling the fit out with other equipment purchases. In those cases, arranging finance separately gives you more control over the terms and the ability to negotiate based on the total loan amount.

Tax Benefits and Depreciation on Fit Out Assets

Fit out improvements are depreciable assets, which means you can claim a portion of the cost each year as a tax deduction. The rate depends on the type of asset. Removable partitions may depreciate over seven years, while built-in cabinetry or electrical work may follow the building's depreciation schedule, which is typically longer.

Your accountant will determine whether the fit out qualifies for instant asset write-off provisions, which allow eligible businesses to claim the full cost in the year the asset is first used. These provisions have changed frequently, so specific thresholds and eligibility should be confirmed before you commit to a finance structure.

Interest payments on the loan are also deductible as a business expense. Combined with depreciation, this reduces the effective cost of the fit out. A $100,000 fit out financed over five years may cost $115,000 in total repayments, but after tax deductions, the net cost to your business could sit closer to $80,000 depending on your marginal tax rate.

When to Combine Fit Out Finance With Equipment Finance

If you are fitting out a new office or clinic, you will likely need equipment at the same time. Desks, chairs, computers, medical devices, kitchen appliances, and point-of-sale systems can all be included in a single equipment finance facility alongside the fit out.

Combining both into one loan simplifies administration and may reduce the interest rate if the total loan amount is large enough to negotiate better terms. The downside is that movable equipment and fixed improvements have different depreciation schedules, which can complicate your tax planning. Some businesses prefer to keep them separate so that each asset class is financed according to its useful life.

In a scenario where a cafe in Northmead is fitting out a tenancy and purchasing coffee machines, refrigeration, and furniture, splitting the finance into two facilities allows the fit out to be repaid over seven years while the equipment is financed over three to four years. This avoids paying interest on short-life assets beyond their replacement cycle.

How Lenders Assess Fit Out Finance Applications

Lenders will review your business financials, the scope of works, and the contractor's credentials. If your business has been operating for less than two years, they may require a director's guarantee or additional security. If you are a self-employed business owner, they may request recent Business Activity Statements and tax returns to verify income.

The lender will also assess whether the fit out adds value to the property or is tenant-specific. A fit out that benefits any future tenant, such as disability access or upgraded electrical capacity, is viewed more favourably than highly customised work that cannot be reused. This affects the loan-to-value ratio the lender is willing to offer.

Progress claims are common for larger fit outs. The lender releases funds in stages as the contractor completes agreed milestones. This protects both you and the lender by ensuring the work is completed before the full loan amount is drawn down. You will need to coordinate between your contractor and the lender to submit invoices and sign-off documents at each stage.

Call one of our team or book an appointment at a time that works for you to discuss fit out finance options for your Northmead business.

Frequently Asked Questions