Everything You Need to Know About Commercial Fitout Finance

Commercial fitout finance lets you spread the cost of your shopfront, office, clinic, or hospitality space over 1 to 7 years while keeping your cash in the business.

Mackay businesses fitting out spaces on Victoria Street, in the CBD, or in retail precincts like Mount Pleasant know the reality: a functional fitout isn't optional. You need counters, fixtures, lighting, flooring, cabinetry, refrigeration, point-of-sale systems, and all the infrastructure that makes a space actually work for customers or clients. Writing a cheque for $80,000 or $150,000 upfront drains the working capital you need for stock, wages, and the first few months of operation. That's where asset finance structured for fitout comes in.

What Lenders Actually Finance in a Commercial Fitout

Lenders finance any equipment or fixture that can be identified, valued, and removed if required. That includes kitchen equipment, bar installations, dental chairs, treatment beds, salon stations, office partitioning, lighting systems, HVAC, counters, shelving, and technology like point-of-sale hardware. What they won't finance is anything that becomes part of the building structure, such as plumbing, electrical wiring, flooring permanently affixed, or structural walls. If it's bolted to the floor but can be unbolted and relocated, it usually qualifies. If it requires a builder to remove it and leaves the landlord's property damaged, it doesn't.

In our experience, the confusion happens when businesses lump the entire fitout cost together without separating what's equipment and what's building works. A cafe fitout might include $60,000 in espresso machines, grinders, refrigeration, and furniture that qualifies, plus another $40,000 in tiling, benchtop installation, and electrical upgrades that doesn't. The equipment component gets financed through equipment finance, and the building works either come from your own capital or a separate business loan.

Chattel Mortgage vs Lease for Fitout Equipment

A chattel mortgage gives you ownership from day one, lets you claim GST input credits upfront if registered, and allows you to depreciate the asset and claim interest as a tax deduction. You'll typically put down 10% to 20% as a deposit, finance the rest, and choose whether to include a balloon payment at the end to reduce monthly repayments. If you're confident the business will generate enough profit to absorb the depreciation and interest deductions, this structure delivers the strongest tax outcome.

A finance lease means the lender owns the equipment during the lease term, you make fixed monthly repayments that are fully deductible, and you can't claim the GST upfront. At the end of the lease, you either pay a residual to own it, refinance the residual, or hand it back. This works when cashflow is the priority and you want to avoid the deposit requirement of a chattel mortgage, or when you're leasing equipment you'll upgrade in 3 to 5 years anyway.

Consider a new physio clinic in Mackay fitting out a 120-square-metre space in a medical precinct. The owner needs treatment beds, ultrasound and electrotherapy units, a reception counter, chairs, computer systems, and a small gym area with rehab equipment. The total equipment cost is $95,000. Structuring this as a chattel mortgage over five years with a 20% deposit and a 20% balloon payment gives monthly repayments around $1,100 to $1,300, depending on the rate. The deposit is $19,000, the balloon is $19,000, and the business gets immediate depreciation deductions on the full $95,000 plus interest deductions on the financed portion. The clinic opens with $60,000 to $70,000 still in the bank for wages, marketing, and the ramp-up period.

How Lenders Assess Fitout Finance Applications

Lenders look at your lease agreement, your business plan or revenue forecast, and your capacity to service the repayments from projected income. If the business is new, they want to see your deposit, your industry experience, and whether you've committed your own capital. If the business is established and you're relocating or expanding, they'll assess recent financials and whether the fitout supports measurable growth. A Mackay retailer moving from a 60-square-metre shop to a 150-square-metre space will get approved faster if the lender sees evidence that current revenue justifies the larger premises and the additional fit-out cost.

The lease term matters. A 3-year lease makes lenders nervous if you're asking to finance equipment over 5 years. They want confidence you'll still be operating in that location when the finance term ends. If your lease has one 3-year option and you've already triggered it, expect lenders to either shorten the finance term or ask for a stronger deposit. If you're on a new 5-year lease with two further options, you'll have more flexibility on structure.

Timing the Fitout Finance Around Your Lease Commencement

You can apply for fitout finance once you've signed the lease and have a fitout quote or scope of works from your supplier or contractor. Most lenders will issue conditional approval within 48 to 72 hours and formal approval within a week, assuming your financials and lease documentation are in order. Settlement happens when the equipment is delivered or installed, not when you sign the finance documents. That means you can have approval locked in, start the fitout, and draw down the funds progressively or in one payment once the supplier invoices.

Mackay's commercial leasing market moves differently depending on whether you're fitting out in the CBD, a suburban retail strip, or an industrial precinct near the airport or harbour. Landlords in high-demand retail locations may offer fitout contributions if you're signing a long lease, which reduces the amount you need to finance. Industrial landlords rarely offer contributions but may give you a rent-free period while the fitout happens, which helps with cashflow in the first few months. Either way, timing the finance drawdown so it aligns with when you actually pay suppliers keeps interest costs down and avoids paying for funds you haven't spent yet.

Depreciation and Tax Treatment for Fitout Equipment

Under a chattel mortgage, you own the equipment and claim depreciation based on the asset's effective life set by the ATO. Most fitout items fall into the general small business pool and can be depreciated at 15% in the first year and 30% each year after on the diminishing balance. If the total cost of equipment is under the instant asset write-off threshold, which fluctuates depending on federal budget settings, you may be able to write off the entire amount in the year of purchase. That threshold has ranged from $20,000 to $150,000 in recent years, so check the current rate with your accountant before structuring the deal.

Under a finance lease, the monthly payment is fully deductible as an operating expense, and you don't claim depreciation because you don't own the asset during the lease term. For businesses expecting strong profit in the first few years, a chattel mortgage with instant write-off or accelerated depreciation delivers a better tax result. For businesses ramping up slowly or expecting lower profit margins, a lease keeps deductions steady and predictable without the need to manage depreciation schedules.

Vendor Finance and Dealer Arrangements

Some fitout suppliers and equipment vendors offer their own finance arrangements, either directly or through a panel lender. The approval process is usually faster because the vendor has a relationship with the funder, and rates can be close to what you'd get going direct to a bank. The risk is that you're limited to one lender's terms, and you won't know if another structure or provider would have delivered a lower rate or better flexibility. In our experience, vendor finance works when the supplier is reputable, the rate is disclosed upfront, and you've at least compared it to what a broker can access across multiple lenders. If the vendor won't disclose the rate or the terms until after you've committed to the equipment, walk away and arrange your own funding.

Dealer finance is common in commercial vehicle and machinery purchases but less structured in the fitout space. The exception is hospitality equipment, where suppliers of commercial kitchens often have embedded finance partnerships. If you're fitting out a restaurant, bakery, or cafe in Mackay and the supplier offers finance on a full kitchen package, ask for the comparison rate, check whether it's a lease or a chattel mortgage, and confirm what happens if equipment fails or needs replacement during the term.

Structuring Fitout Finance Around Your Business Cashflow

Fixed monthly repayments let you budget accurately, but they don't account for seasonal variation. A Mackay tourism-facing business such as a cafe near the marina or a retail shop in a holiday precinct will have stronger revenue in winter and shoulder seasons when visitor numbers peak. Structuring the finance with a moderate balloon payment reduces the monthly cost during quieter months, and you pay down the balloon when cashflow is stronger or refinance it if the business hasn't generated the surplus you expected.

Some lenders allow payment holidays in the first 3 to 6 months, which aligns repayments with when the business starts generating revenue. This works for new fitouts where you need time to build a customer base. Established businesses relocating or refitting usually don't need the holiday because revenue continues from day one, but it's worth asking if your lease includes a rent-free period and you want to defer all occupancy costs until you're trading.

Call one of our team or book an appointment at a time that works for you. We'll structure the fitout finance around your lease term, your cashflow, and the tax outcome that makes sense for your business. We work with lenders who understand commercial fitout, and we'll separate what qualifies from what doesn't before you commit to a supplier or contractor.

Frequently Asked Questions