Unlock the secrets to restaurant fitout finance

Funding a restaurant fitout without wiping out your cash reserves

You can fund the majority of your restaurant fitout through equipment finance and split the costs across several years. Commercial kitchens, bar setups, seating, refrigeration, coffee machines, point-of-sale systems, and even some fixtures can be financed, which means you preserve working capital for stock, wages, and the first few months of trade when cash flow is unpredictable.

Consider a scenario where a new cafe in Wollongong's Crown Street precinct needs a commercial espresso machine, a blast chiller, benchtop fridges, an oven, seating for 60, a POS system, and outdoor furniture. The total fitout comes to around $180,000. Instead of paying cash upfront, the owner structures a chattel mortgage for the core kitchen and bar equipment, which covers about $140,000, and arranges a separate hire purchase agreement for the POS and furniture. Monthly repayments sit at roughly $3,200 across both agreements, and the business claims depreciation on the equipment and deducts interest as a business expense. That $180,000 stays in the bank account and gets used for the first stock order, staff wages, and a marketing push before opening.

What counts as equipment in a fitout

Most lenders will finance anything that can be removed from the premises and resold if needed. Commercial ovens, grills, fryers, refrigeration units, coffee machines, dishwashers, furniture, bar equipment, and point-of-sale systems all qualify. Structural work like plumbing, electrical fitout, tiling, or building modifications usually do not, because they become part of the property and cannot be reclaimed by a lender.

Some lenders will include soft furnishings, outdoor settings, and even kitchen extraction systems if they are modular and can be uninstalled. If you are unsure whether something qualifies, the general rule is whether the item can be picked up and moved to another location without demolition. That distinction shapes how you structure the finance and what gets covered under equipment finance versus a business loan or line of credit.

Structuring the deal with chattel mortgage or hire purchase

A chattel mortgage lets you own the equipment from day one while the lender holds a charge over it as security. You claim depreciation and interest as tax deductions, and at the end of the term, the equipment is yours outright. This structure works well when you want full ownership and maximum tax benefits. Fixed monthly repayments make budgeting predictable, and you can add a balloon payment at the end to lower the monthly cost if cash flow is tight in the first year.

Hire purchase is similar but ownership transfers at the end of the agreement. You make regular payments, claim a deduction for the interest component, and the lender retains ownership until the final payment. This can be useful if you want to upgrade equipment regularly or if the lender requires additional security. Both structures allow you to spread the cost over one to seven years, depending on the type of equipment and its expected lifespan. For hospitality fitouts, three to five years is common because it matches the upgrade cycle for most commercial kitchen equipment.

How GST treatment works on equipment finance

Under a chattel mortgage, you can usually claim the full GST upfront in your next Business Activity Statement, which improves cash flow immediately. The loan amount includes GST, but you recover it straight away rather than waiting to generate enough revenue to offset the cost. With hire purchase, GST is claimed progressively as part of each repayment, because ownership has not transferred yet. That difference can affect your cash position in the first quarter, especially if you are fitting out before opening and have no trading income yet.

If you are registered for GST and using a chattel mortgage, the upfront GST claim can return a significant amount to the business within weeks of settling the finance. For a $140,000 fitout, that is roughly $12,700 back into your account before you serve the first customer. The structure you choose should factor in whether you need that cash boost early or whether you prefer to smooth the tax benefit across the term.

Fixed monthly repayments and balloon payments

Fixed monthly repayments give you certainty, which matters when you are managing wages, rent, stock orders, and seasonal fluctuations in trade. You know exactly what the equipment will cost each month, and you can build that into your operating budget without worrying about rate movements. Some agreements include a balloon payment at the end, which reduces the monthly cost but leaves a lump sum due when the term finishes. A balloon payment of 20 to 30 percent is common and can be refinanced, paid from cash flow, or cleared by trading in the equipment and upgrading.

For a new restaurant, a balloon payment can lower the monthly commitment during the critical first year when revenue is still building. Just factor in how you will handle the residual amount when it comes due, whether that is through retained earnings, a refinance, or a planned equipment upgrade.

Fitting out before you open versus upgrading an existing venue

If you are fitting out before opening, lenders will want to see a business plan, your lease agreement, and evidence of hospitality experience or a solid trading history in another business. Pre-revenue approvals are possible, but the loan amount may be capped at a percentage of the total fitout cost, and you might need to show cash reserves or a deposit. Once the venue is trading, you can usually access higher loan amounts and more flexible terms because the lender can assess actual cash flow and revenue.

Upgrading existing equipment in an operating restaurant is often more straightforward because the business has a trading history and cash flow to support the repayments. Lenders will review recent financials and bank statements, and approvals can be turned around quickly. If you are replacing worn-out equipment or adding capacity to meet demand, the process is typically faster and requires less documentation than a pre-opening fitout.

Tax benefits and depreciation on hospitality equipment

Commercial kitchen equipment and hospitality fitouts qualify for depreciation deductions, and some items may be eligible for instant asset write-off if they fall under the threshold and your business meets the criteria. Depreciation reduces your taxable income each year, and the interest on the finance is deductible as a business expense. Over a five-year term, the combined tax benefit can be substantial, especially in the first few years when depreciation rates are higher.

Your accountant will calculate the depreciation schedule based on the type of equipment and its effective life, but the structure you choose affects how and when you claim the deductions. Under a chattel mortgage, you own the equipment and claim depreciation from day one. Under hire purchase, depreciation is usually claimed by the lender until ownership transfers, so you only deduct the interest component. If tax planning is a priority, structure the finance with that in mind and talk through the options with your accountant before signing.

Using vendor finance or dealer finance for specific equipment

Some equipment suppliers offer vendor finance or dealer finance, which can be convenient because the approval process is handled at the point of sale. Rates and terms vary, and it is worth comparing what the supplier offers against what you can access through a broker. Vendor finance might be competitive for a single high-value item like a commercial oven or espresso machine, but if you are financing the full fitout, a broker can usually source better terms and structure multiple items under one agreement.

Dealer finance can also lock you into a specific supplier, which limits your ability to shop around or negotiate on price. If the supplier is offering a discount or package deal that includes finance, compare the total cost including interest against an independent loan. Sometimes the discount is absorbed by a higher rate, and you end up paying more over the term.

Preserving working capital for stock, wages, and the first few months of trade

The biggest risk in a new restaurant is running out of cash before the business builds momentum. Rent, wages, stock, utilities, and marketing all need to be paid from day one, and revenue takes time to ramp up. Financing the fitout instead of paying cash means you keep that capital available for the operating costs that cannot be deferred. In a scenario where a new restaurant in Wollongong's harborside precinct has $200,000 in the bank and a $150,000 fitout, paying cash leaves $50,000 for everything else. Financing the fitout leaves the full $200,000 available, minus any deposit required by the lender, and spreads the equipment cost across 60 months at a fixed rate.

That difference can determine whether the business survives the first six months or runs into cash flow trouble before it has a chance to build a customer base. Working capital is the buffer that lets you adjust the menu, hire the right staff, and ride out slower weeks without panicking. Financing the fitout protects that buffer.

If you are setting up a restaurant fitout in Wollongong and want to structure the finance in a way that fits your cash flow and tax position, call one of our team or book an appointment at a time that works for you. We work with lenders across Australia who understand hospitality and can tailor the structure to your business needs.

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