Unlock the secrets to funding your fitout

A commercial fitout can cost anywhere from $30,000 for a small retail refresh to $300,000 or more for a full clinic or restaurant build, and most businesses don't have that sitting in the bank.

Instead of draining your reserves or putting off the fitout until cash piles up, commercial equipment finance lets you spread the cost over time while keeping your working capital intact. You borrow the amount you need, the fitout goes ahead, and you repay through fixed monthly repayments over a term that suits your cashflow. The equipment or fitout itself usually acts as collateral, which keeps the interest rate lower than an unsecured loan.

In Launceston, where businesses range from St John Street cafes to specialist medical clinics near the General Hospital, the type of fitout and how you structure the loan can make a big difference to what you pay and how the tax benefits land.

How Commercial Fitout Finance Differs From Standard Equipment Loans

Commercial fitout finance is a form of asset based lending, but the asset is the physical improvement you're making to the premises rather than a piece of machinery you can drive off site. That distinction matters when it comes to security and loan structure.

Consider a dental practice setting up in Prospect, fitting out three treatment rooms, reception, sterilisation, and a waiting area. The total cost is $180,000, covering joinery, electrical, plumbing, air conditioning, and fixed equipment like chairs and compressors. Because the fitout is attached to the lease, the lender may ask for additional security or structure the loan as a chattel mortgage over the movable equipment with a separate component for the fixed build.

The loan amount is determined by the invoice from the fitout contractor, not by the ongoing value of the fitout once it's installed. That's different from buying new equipment like an excavator or truck, where the asset holds resale value. Fitouts are custom and depreciate fast, so lenders typically cap the finance at 80 to 100 per cent of the invoice and keep the loan term shorter, usually three to five years.

Chattel Mortgage vs Hire Purchase for Fitout Projects

A chattel mortgage is the most common structure for a commercial fitout if you own the business and want to claim depreciation and interest as tax deductions. You own the fitout from day one, which means you can claim the tax benefits immediately and potentially access instant asset write-off provisions if the fitout cost falls within the threshold.

Hire Purchase works differently. The lender owns the fitout until the final payment is made, and you claim the full repayment amount as a tax deduction over the life of the lease. There's no upfront GST claim, and you can't use instant asset write-off, but the monthly tax deduction is higher. It's more common for businesses that want predictable deductions and don't have the cashflow to cover the GST upfront.

In a scenario like a cafe fitout on George Street, where the owner is leasing the premises and fitting out the kitchen, servery, and dining area for $90,000, a chattel mortgage lets them claim the GST back in the first BAS and then depreciate the fitout over four years. If they're doing decent trade, that GST refund can cover the first few months of repayments while revenue builds.

Tax Benefits and Depreciation on Commercial Fitouts

Fitouts are depreciating assets, which means you can write off the cost over the effective life of the asset as determined by the ATO. Most fitout components fall into the low-value pool or are depreciated over five to ten years depending on what's being installed.

If you use a chattel mortgage, you can claim the interest portion of each repayment as a tax deduction, plus the annual depreciation of the fitout. If the fitout qualifies for instant asset write-off and your business meets the eligibility criteria, you may be able to claim the full cost in the year you install it, which can deliver a significant tax refund.

A medical equipment finance scenario might involve a physiotherapy clinic in Invermay fitting out treatment rooms with plinths, electrical stimulation devices, and custom cabinetry for $65,000. Under a chattel mortgage, the clinic claims the GST straight away, then deducts the interest on each repayment and the depreciation annually. Over a four-year term, that can reduce taxable income by around $16,000 per year, depending on the interest rate and depreciation method.

GST treatment varies by structure. Under a chattel mortgage, you pay GST upfront and claim it back. Under Hire Purchase, GST is included in each repayment and claimed progressively, which smooths out the cashflow impact but delays the refund.

How Lenders Assess a Fitout Application

Lenders look at three things when you apply for commercial fitout finance: the business financials, the lease term, and the contractor invoice.

If you're leasing the premises, the lender will want to see that your lease runs longer than the loan term. A five-year loan on a premises with two years left on the lease doesn't stack up, because if you move out, the fitout stays behind. Most lenders want at least 12 months beyond the final repayment, and some will ask for a copy of the lease agreement to confirm.

Your financials need to show you can manage the repayments without stretching cashflow. That usually means profit and loss statements for the last two years if you're an established business, or a detailed forecast and director guarantee if you're a startup. Lenders who offer access to Asset Finance options from banks and lenders across Australia will shop the deal around to find a funder who's comfortable with your lease situation and trading history.

The contractor invoice needs to be detailed enough that the lender can see what they're funding. A single line item that says "fitout works $150,000" won't get approved. The lender wants to see the breakdown: joinery, electrical, plumbing, HVAC, flooring, and so on. That level of detail also helps your accountant when it's time to claim depreciation.

Balloon Payments and How They Affect Monthly Cashflow

A balloon payment is a lump sum left at the end of the loan term, which reduces your fixed monthly repayments during the loan. It's common on vehicle finance and equipment leasing, but less common on fitouts unless you're confident the business will generate enough surplus to pay the balloon when it's due.

For a hospitality equipment finance deal where a Launceston restaurant fits out a new kitchen for $120,000 over five years, a 30 per cent balloon payment would leave $36,000 owing at the end. That drops the monthly repayment by around $600, which can help in the early months when foot traffic is still building. But when the balloon is due, you either pay it in cash, refinance it, or sell the business and settle the loan from the proceeds.

If the fitout has no resale value, a balloon payment can leave you stuck. That's why most brokers recommend structuring fitout finance with zero balloon unless there's a clear plan to pay it down or refinance before the term ends.

Vendor Finance and Dealer Finance on Fitout Components

Some fitout suppliers and contractors offer vendor finance, which is a loan arranged directly through the supplier rather than a bank or broker. It can be faster to approve because the supplier controls both the goods and the loan, but the interest rate is often higher and the terms less flexible.

Dealer finance works the same way and is common for office equipment, technology equipment finance, and factory machinery. If you're fitting out a co-working space in the Launceston CBD and buying desks, chairs, screens, and IT infrastructure, the supplier might offer a finance package on the spot. That can be convenient, but it's worth comparing the rate and terms with what a broker can access through the wider market.

In our experience, vendor finance works when the loan amount is small and the approval needs to happen in a day or two. For anything over $50,000 or where you want to include multiple suppliers in one loan, going through a broker who can access Asset Finance options from banks and lenders across Australia usually delivers a lower rate and more control over the structure.

When to Finance the Fitout Separately From Other Equipment

If your fitout includes both fixed elements like walls, flooring, and lighting, and movable equipment like coffee machines, point-of-sale systems, or treatment chairs, you can split the finance into two loans: one for the fitout and one for the equipment.

That gives you more flexibility on term and structure. The fitout might run over four years with no balloon, while the equipment runs over three years with a 20 per cent balloon because it has resale value. Splitting the loans also makes it clearer for your accountant when calculating depreciation, because different assets have different effective lives.

For a retail fitout on Brisbane Street where the shopfront, shelving, and lighting cost $70,000 and the point-of-sale and security system cost $15,000, financing them separately lets you claim instant asset write-off on the equipment if it qualifies, while depreciating the fitout over the standard period. It also means you're not locked into a single repayment that doesn't match the life of the assets.

Call one of our team or book an appointment at a time that works for you. We'll talk through your fitout plans, work out what structure fits your tax position and cashflow, and arrange the finance before the contractor starts work.

Frequently Asked Questions