Fitting out a commercial space in Perth can cost anywhere from $50,000 for a small office to $300,000 or more for a full restaurant or medical clinic.
Most business owners face the same tension: you need the fit out done properly to open your doors or attract clients, but writing a cheque for the full amount upfront leaves your business accounts looking pretty bare when you still have wages, stock, and operating costs to cover. Fit out finance lets you spread that capital expense over time while preserving the cash you need to actually run the business.
What Fit Out Finance Covers
Fit out finance is a type of asset finance that covers the physical items and installations you need to make a commercial space functional. This includes office furniture, shopfitting, kitchen equipment for hospitality venues, medical equipment for clinics, reception counters, lighting, shelving, display units, and built-in joinery. The finance usually covers both the equipment itself and the labour to install it, provided you can itemise the quote.
Consider a medical practice taking over a shell space in Subiaco. The fit out quote might include treatment chairs, diagnostic equipment, reception furniture, consultation room joinery, waiting room seating, and signage. Rather than paying the whole amount before opening, the practice spreads the cost through fixed monthly repayments over three to five years. The monthly cost becomes predictable, and the business preserves $150,000 in working capital for staffing and supplies during those crucial first months.
How the Structure Works
A chattel mortgage is the most common structure for fit out finance when you're an established business or company. You own the assets from day one, claim the depreciation each year, and claim the interest portion of your repayments. The lender holds security over the equipment until the loan is repaid. Most lenders offer terms between two and five years depending on the expected life of the equipment.
You can also structure a balloon payment at the end of the term, typically around 20-30% of the loan amount. This reduces your monthly repayment but leaves a lump sum due when the term ends. That approach works if you expect improved cashflow down the track or plan to refinance when the balloon falls due.
For businesses in their first year or startups without trading history, a hire purchase arrangement might be more accessible. You don't own the equipment until the final payment, but the structure is similar: fixed monthly repayments, security over the assets, and full use of the equipment from day one.
Preserving Capital While You Build Revenue
The argument for financing a fit out rather than paying cash comes down to timing. A new cafe in Mount Lawley might have $200,000 available between the owners, but if $120,000 goes into the fit out, that leaves $80,000 to cover the lease bond, opening stock, wages for three months, marketing, and the inevitable slow first few months while you build a customer base.
Spread that $120,000 fit out over four years at around $2,800 per month, and suddenly you've got $120,000 still sitting in your account to manage the business through the startup phase. The cost of the finance is real, but so is the cost of running out of cash three months in because all your capital went into the joinery and espresso machine.
The same logic applies when you're upgrading existing equipment or expanding into a second location. Paying cash might feel satisfying, but it's not always the smartest move if it leaves you stretched when other expenses land.
GST Treatment and Depreciation
Under a chattel mortgage, you can usually claim the full GST input credit upfront when you purchase the equipment, even though you're financing it. That means if your fit out costs $110,000 including GST, you claim back the $10,000 GST component in your next BAS, reducing the effective amount you're financing.
You also own the assets from day one, so you claim depreciation on the full value each year according to the ATO's effective life guidelines. Office furniture might depreciate over ten years, while hospitality equipment often sits around five to seven years. Your accountant will sort the specifics, but the ability to claim both depreciation and the interest portion of your repayments makes the tax treatment one of the more useful aspects of this kind of finance.
What Lenders Look For
Lenders want to see that the business can service the repayments from revenue. If you're an established business, they'll review your financials and trading history. If you're opening a new venture, they'll look at director guarantees, your personal financial position, and how much equity you're putting in yourself. Most lenders expect you to contribute at least 20-30% of the total fit out cost, though some will go higher if the equipment holds strong resale value.
The equipment itself acts as collateral, but not all fit outs have equal security value. A commercial oven or medical imaging machine can be repossessed and resold. Custom joinery built into the walls of a tenancy has almost no resale value if things go wrong. Lenders will finance both, but they'll price the risk differently and may require additional security for lower-value items.
If you're leasing the premises, some lenders will ask to see your lease term. They won't usually lend beyond your lease period unless you can demonstrate plans to renew or relocate, because the equipment often can't be removed without destroying it or breaching your lease.
Fitting Finance Around Your Business Needs
Access to asset finance options from banks and lenders across Australia means the structure can be tailored to what actually works for your cashflow. Some businesses prefer shorter terms to clear the debt quickly. Others stretch it out to keep repayments lower during the growth phase. Some industries like hospitality face seasonal cashflow, so a structured repayment plan that accounts for quieter months can make a genuine difference.
Freo Finance works with Perth business owners to match the right structure and lender to the specific fit out, whether that's a new retail store in Claremont, an office upgrade in the CBD, or a dental clinic in Joondalup. The structure you choose affects your tax position, your monthly cashflow, and how much capital you tie up, so it's worth talking through the options before you sign the fit out contract.
If you're planning a commercial fit out and want to understand how finance could work for your situation, call one of our team or book an appointment at a time that works for you.
