Key Takeaways
- Fit-out finance is a distinct category from property finance and general business loans, designed to fund the build, refurbishment, equipment installation, and improvements that turn a commercial property into operational business premises.
- Fit-out finance is typically structured separately from property finance because the loan term, security, and risk profile of fit-out lending differ from property lending and from general business borrowing.
- Most fit-out loans run 3 to 7 years (matching the useful life of the fit-out assets and typical lease terms), with the fit-out itself providing security alongside director personal guarantees.
- The right mix of fit-out finance, equipment finance, working capital, and internal cash depends on the specific business situation; coordinating these sources with specialist broker support typically produces better outcomes than approaching each separately.
Why Fit-Out Finance Is a Distinct Category
When a business takes on new premises or substantially refurbishes existing premises, the work involved is typically extensive: internal walls and ceilings, flooring, plumbing and electrical, kitchens and amenities, signage and branding, technology infrastructure, fixtures and fittings, and equipment installation. These costs typically run from $50,000 for modest professional offices to $1 million+ for hospitality venues or specialist healthcare facilities. The investment is too large for most businesses to fund from cash flow alone, but doesn’t fit neatly into either pure property finance or general business lending.
Fit-out finance fills this gap. It’s a specific lending category designed to fund the transformation of premises into operational business space, with loan structures, security mechanisms, and terms tailored to the characteristics of fit-out work. Understanding what fit-out finance is, when it’s the right tool, how it differs from alternatives, and how it can be structured alongside other facilities helps business owners make informed decisions about funding renovation work. Hence, this guide works through fit-out finance from purpose to practical application, with attention to how it sits alongside property finance and general business lending.
This guide explains commercial fit-out finance for businesses funding renovations, refurbishments, equipment installation, and capital improvements to their premises. The Loanworx working capital and fit-out finance team can structure your renovation funding alongside any related property or equipment finance, resulting in a coordinated funding package that aligns with the work’s scope and the business’s broader position.
What Counts as Fit-Out, Refurbishment, and Capital Improvements
Fit-out is a broad category that covers several distinct types of work, each with different financial characteristics. Understanding the categories helps borrowers identify which fit-out finance approach suits their specific situation.
New Premises Fit-Out
When a business takes on new premises (whether leased or purchased), the space typically needs substantial work to make it operational: partitioning into working areas, installing necessary services (electrical, plumbing, HVAC), creating reception and amenity spaces, installing branded signage, and fitting out specialised areas (kitchens, treatment rooms, workshops). New premises fit-out is typically the largest single fit-out category and may run $100,000 to $500,000+, depending on the business type and premises size.
Refurbishment of Existing Premises
Established businesses sometimes refurbish their existing premises: refreshing the interior, updating amenities, improving accessibility, modernising technology infrastructure. Refurbishment is typically less extensive than a new fit-out but can still involve substantial costs ($30,000 to $200,000 for a typical small-business refurbishment). Refurbishment is often driven by lease renewal requirements, franchise refresh cycles, or competitive positioning relative to other businesses in the area.
Expansion and Extension
Growing businesses sometimes need to expand their footprint within existing premises (by taking adjacent space or adding mezzanine areas) or extend the building itself. Expansion fit-out typically combines new fit-out work for the additional space with refurbishment of the existing space to integrate the expansion. Costs vary widely depending on the scope of the expansion.
Specialised Equipment Installation
Some fit-out work involves the installation of specialised equipment that’s integral to the premises: commercial kitchen equipment for food businesses, medical and dental equipment for healthcare, manufacturing equipment for production businesses, and gym equipment for fitness facilities. While the equipment itself may be financed separately through equipment finance, the installation work (electrical, plumbing, structural reinforcement) is typically part of the fit-out finance.
Capital Improvements
Beyond cosmetic refurbishment, capital improvements substantially enhance the premises: structural changes, accessibility upgrades (ramps, lifts, accessible bathrooms), energy-efficiency upgrades (solar, insulation, efficient HVAC), and technology infrastructure upgrades (data cabling, security systems, network infrastructure). Capital improvements are typically longer-life investments that benefit the business for 10+ years and have specific tax treatment under capital works rules.
Compliance Upgrades
Regulatory or compliance-driven upgrades sometimes require fit-out finance: changes mandated by accessibility legislation, food safety requirements, healthcare regulations, and fire safety standards. These upgrades may be modest in scope but can be expensive and time-sensitive. Compliance-driven fit-out is often less optional than other categories; deferring it can result in operational restrictions or penalties.
When Borrowers Need Fit-Out Finance
Several specific situations commonly drive the need for fit-out finance. Each has different timing, planning, and finance considerations.
Moving to New Premises
When a business relocates (whether expanding into larger premises, downsizing to smaller premises, or moving to a better location), the new premises typically need substantial fit-out before operations can begin. Fit-out finance for new premises usually needs to be in place before settlement on the lease or property purchase, because the fit-out work happens between settlement and the business opening. Coordinating fit-out finance with the broader premises decision is essential.
End of Lease Refresh
When a lease comes up for renewal, landlords sometimes require the tenant to refresh the fit-out as a condition of renewal, or the tenant chooses to refresh proactively to maintain the premises’ commercial appeal. Refresh costs typically range from $30,000 to $150,000 for small-business premises. Lease renewal-driven refresh has specific timing pressure: the work must be completed within a defined window to support the renewal.
Franchise System Refresh
Franchise systems typically require periodic fit-out refresh (every 5 to 7 years for most systems) to maintain brand standards. These refreshes can be substantial ($50,000 to $300,000+) and are often non-negotiable: the franchisee must refresh to maintain the franchise. Planning ahead for refresh cycles is essential; reactive refreshes under time pressure typically cost more and yield worse outcomes.
Business Growth Requiring More Capacity
Growing businesses sometimes need to expand their physical capacity: more workstations, more treatment rooms, more retail floor space, more storage. The fit-out work to support growth can be substantial, and the timing matters: growth-driven fit-out should occur before the business outgrows its current capacity, not after.
Technology and Operational Upgrades
Major technology upgrades (new POS systems, complete IT infrastructure replacement, integration of new systems) often involve fit-out work alongside the technology itself: data cabling, equipment installation, workspace reconfiguration. These upgrades are typically driven by operational requirements rather than aesthetic refresh.
Acquiring an Existing Business
When a business acquires existing premises (perhaps from a similar business that’s closing or being sold), the premises typically need fit-out work to suit the new operator’s specific requirements. Even where the previous fit-out is broadly suitable, branding changes, operational adjustments, and refresh work are typically needed. Acquisition-driven fit-out is under tight time pressure between acquisition completion and the new business opening.
How Fit-Out Finance Is Structured
Fit-out loans have specific structural characteristics that distinguish them from both commercial property loans and general business loans. Understanding the typical structure helps borrowers plan and compare offers.
Loan Amount and LVR
Fit-out finance typically covers 70% to 85% of total fit-out costs, with the borrower funding the balance from internal cash. Some lenders go higher (90% or even 100%) for strong borrowers in favoured sectors; others cap at 60% to 70% for marginal borrowers or higher-risk fit-out categories. The ‘LVR’ in fit-out finance is essentially the loan against the assessed fit-out cost, not against any property value.
Loan Term
Fit-out loan terms typically run 3 to 7 years, matching the useful life of the fit-out assets and, where applicable, the typical lease term. Shorter terms (3 to 5 years) typically apply to fit-out with a shorter useful life (e.g., cosmetic refurbishments, technology installations) or where the underlying lease is shorter. Longer terms (5 to 7 years) typically apply to more substantial fit-out (new premises, major refurbishments, capital improvements) on longer leases or on owned premises.
Security
Fit-out finance security typically includes a charge over the fit-out assets themselves (where these can be separately identified), a general security agreement over the borrowing entity, and personal guarantees from directors. The personal guarantee requirements that typically apply to fit-out finance are central to most fit-out lending because the fit-out assets themselves often have limited realisable value if separated from the business, making the personal commitment of directors a key part of the lender’s security position.
Pricing
Fit-out finance pricing typically runs 1% to 3% above commercial property rates, reflecting its less-secured nature compared with property mortgages. Current pricing typically ranges from 7.5% to 10.5%, depending on borrower strength, lender, and specific structure. Pricing varies materially between lenders; specialist business lenders sometimes offer sharper rates than major banks for the same fit-out finance.
Repayment Structure
Most fit-out loans are principal and interest repayment over the loan term. Some lenders offer interest-only periods at the start of the loan (typically 6 to 12 months) to support the business through the establishment phase when revenue from the new premises is building. Pure interest-only fit-out finance is unusual because lenders prefer principal amortisation given the depreciating nature of fit-out assets.
Drawdown and Progress Payments
Fit-out work happens in stages over weeks or months, with payments typically due to contractors at various milestones. Fit-out finance often allows progressive drawdown matching the work schedule: initial drawdown for deposits and early-stage work, subsequent drawdowns as work progresses, and final drawdown on completion. Some lenders fund the entire loan upfront and rely on the borrower to manage cash flow to contractors. Understanding the drawdown structure helps borrowers plan cash flow during the fit-out period.
Documentation Requirements
Fit-out finance typically requires: a detailed scope of work and cost breakdown, contractor quotes (often three quotes for substantial items), construction or shopfitting agreements, lease documentation showing landlord consent where applicable, and the business’s standard financial documentation. The detailed scope and cost information is more demanding than for general business loans because the lender needs to verify what’s being financed.
Separating Fit-Out from Property Finance
One of the most important structural decisions in fit-out lending is whether to combine fit-out with property finance (where the borrower is buying the premises) or keep them separate. Both approaches have advantages depending on the situation.
Combining Fit-Out with Property Finance
Some lenders allow fit-out to be financed as part of the property loan, with the total loan covering both the property purchase price and the fit-out cost. This produces a single loan facility, simplified documentation, and sometimes lower pricing (since the property security supports the broader borrowing). The trade-off is that the fit-out is amortised over the longer property loan term (15 to 25 years rather than 3 to 7 years), which has implications for both cash flow and tax treatment.
Keeping Fit-Out Separate
More commonly, fit-out finance is kept separate from property finance. The property loan funds the property purchase; a separate fit-out loan funds the fit-out work. This approach matches the loan term to the useful life of the asset being financed (long term for property, shorter term for fit-out), provides cleaner accounting and tax treatment, and gives the borrower flexibility to refinance one without affecting the other.
When Each Approach Suits
Combining suits situations where: the borrower needs the highest possible total borrowing (and the property security supports it), simplicity is more important than optimal structure, the lender offers materially better pricing for the combined facility, or the fit-out is genuinely a long-lived asset that warrants long-term amortisation. Keeping separate suits situations where: the fit-out has a shorter useful life than the property, the borrower wants flexibility to manage each facility independently, tax treatment varies significantly between property and fit-out components, or different lenders are best for each category.
Combining with Leased Premises
Where the business is leasing rather than buying, fit-out is necessarily separate from property finance (because the borrower isn’t financing the property itself). The fit-out loan stands alone, secured against the fit-out and supported by personal guarantees. This is the most common scenario for fit-out finance in practice.
Multiple Facility Coordination
Larger fit-outs often involve multiple finance facilities working together: fit-out finance for construction work, equipment finance for major equipment, working capital for early-period operations, and sometimes property finance where the premises are being purchased. Coordinating across multiple facilities requires careful planning. A specialist commercial broker familiar with multi-facility coordination typically produces better outcomes than approaching each facility separately.
Alternatives to Dedicated Fit-Out Finance
Dedicated fit-out finance is not the only option for funding renovation work. Several alternatives exist, each with different characteristics. The right choice depends on the business’s specific situation.
General Business Loan
A general business loan can fund fit-out work alongside other business needs, providing flexibility but typically at higher pricing than dedicated fit-out finance. Business loans usually require more borrower strength and provide less specific security positioning. They suit borrowers for whom the fit-out is part of broader business funding needs, or for whom the lender prefers a single facility structure.
Equipment Finance
Equipment within the fit-out (POS, kitchen equipment, medical equipment, manufacturing tools) is often financed through dedicated equipment finance rather than included in fit-out finance. Equipment finance typically offers competitive rates (the specific equipment provides clean security) and can run alongside fit-out finance for the construction and installation work. The split between equipment finance and fit-out finance varies by deal.
Working Capital and Overdrafts
Some smaller fit-out work can be funded through working capital facilities or business overdrafts. This works for modest cosmetic refurbishment ($20,000 to $50,000) but doesn’t typically suit substantial fit-out work. Working capital facilities are typically more expensive than dedicated fit-out finance for substantial amounts, but more flexible for irregular, smaller amounts.
Internal Cash
Established businesses with strong cash reserves sometimes fund fit-out from internal cash rather than borrowing. This avoids the cost and complexity of finance but consumes cash that might otherwise be deployed in business operations. The decision between internal cash and finance involves the same trade-offs as other capital allocation decisions: opportunity cost of the cash, after-tax cost of the borrowing alternative, and the business’s overall liquidity position.
Vendor and Contractor Finance
Some fit-out contractors and equipment vendors offer payment terms or vendor finance for substantial fit-out work. This can be convenient (single point of coordination with the contractor) but may not be the most competitive terms available. Vendor finance is typically packaged through finance brokers or partner lenders rather than direct from the contractor; the underlying terms should be compared with independent alternatives.
Landlord Contributions
In commercial leasing, landlords sometimes provide fit-out incentives to attract tenants: cash contributions toward fit-out costs, rent-free periods, or direct funding for base-building work. These contributions reduce the tenant’s fit-out funding requirement but typically come with strings attached (longer lease commitments, market-rent assumptions, restrictions on lease assignment). Negotiating fit-out contributions is part of the broader lease negotiation; specialist leasing agents can identify what’s typical in the specific market.
Tax Treatment of Fit-Out Costs
Fit-out and refurbishment costs have specific tax treatment that can materially affect the after-tax cost of the work. The treatment varies by the type of expenditure: some fit-out is immediately deductible, some is depreciated over short periods, and some is treated as capital works, deducted over long periods. Personalised tax advice is essential before committing to substantial fit-out work.
Capital Works Versus Depreciating Assets
The fundamental tax distinction in fit-out is between capital works (structural elements that become part of the building) and depreciating assets (fixtures, fittings, equipment that can be separately identified). Capital works are typically depreciated at 2.5% or 4% per year over 25 to 40 years. Depreciating assets are written off over their effective life, which varies by asset type and can be much shorter (3 to 15 years for most fit-out items). The split significantly affects the after-tax cost in early years.
Repairs Versus Improvements
Maintenance and repairs that restore the function of existing premises are typically fully deductible in the year incurred. Improvements (alterations that go beyond restoration) are typically capital and must be depreciated. The distinction can be subtle: replacing worn carpet like-for-like is typically a repair; replacing worn carpet with higher-grade flooring is typically an improvement. The accountant’s judgement on this categorisation matters substantially.
Leasehold Improvements
Fit-out work on leased premises creates leasehold improvements that are subject to specific tax treatment. Capital works on leased premises are typically deducted over 40 years (or the lease term if shorter); depreciating assets are deducted over their effective life. Where the lease ends before the depreciation is fully claimed, balancing adjustment provisions apply. The interaction between lease term and depreciation timing is complex; accountant involvement is essential.
Instant Asset Write-Off
Eligible small businesses can sometimes use instant asset write-off provisions to immediately deduct certain assets purchased as part of a fit-out, rather than depreciating over multiple years. The eligibility criteria and asset value thresholds change periodically in line with government policy; current rules should be checked with an accountant. Where applicable, the instant asset write-off can materially reduce after-tax cost in the year of purchase.
GST Treatment
Fit-out costs typically attract GST at 10%, which GST-registered businesses can claim as input tax credits. The timing of GST cash flows (paid upfront, claimed back in the BAS for the period) affects working capital during the fit-out period. For substantial fit-out costs, the timing of GST can be material; planning BAS lodgement and refund timing helps manage cash flow.
Why Tax Advice Is Essential
The tax treatment of fit-out is sufficiently complex that professional advice typically pays for itself many times over. An accountant familiar with commercial fit-out tax can: optimise the split between capital works and depreciating assets, identify items qualifying for instant asset write-off, structure the deal to maximise GST efficiency, and ensure compliance with depreciation and capital works rules. This advice should be obtained before fit-out work is contracted, not after, since some decisions are difficult to change retrospectively.
A Worked Example: $300,000 Café Fit-Out
To make the structure concrete, consider a coffee shop owner taking over new leased premises and planning a $300,000 fit-out. The premises are in a strong retail location with a 5-year lease and option to extend. The fit-out includes substantial commercial kitchen equipment, custom millwork, and brand-specific design elements.
The Cost Breakdown
Construction work (walls, floors, ceilings, electrical, plumbing): $120,000. Commercial kitchen equipment (espresso machines, refrigeration, food preparation): $80,000. Millwork and custom furniture (counter, seating, fixtures): $50,000. Technology (POS, security, lighting controls): $25,000. Signage and branding: $15,000. Soft fitout (curtains, decorative elements): $10,000. Total: $300,000.
The Finance Structure
Fit-out finance for construction, millwork, technology, signage, and soft fitout: $220,000 of $220,000 costs (100% finance for established borrower with strong covenant). Loan: 7-year term at 8.5%, repayments approximately $3,540 per month. Equipment finance for commercial kitchen equipment: $80,000 (100% finance) at 7.5% over 5 years, repayments approximately $1,600 per month. Combined monthly loan repayments: $5,140. Total borrowing: $300,000, with no upfront capital contribution from the borrower.
The Cash Flow Impact
Monthly repayments of $5,140 represent the ongoing financial commitment. For the cafe to support this comfortably, monthly revenue needs to be sufficient to cover all operating costs (lease, staff, supplies, utilities) and loan repayments, with a reasonable buffer. At a typical café, gross margins of 65-70%, monthly revenue of $80,000 to $100,000 would support the position. The borrower should ensure that projected revenue comfortably exceeds this amount before committing.
The Tax Position
Capital works component (construction, structural elements): approximately $120,000 capital works, depreciated at 2.5% per year over 40 years = $3,000 deduction per year. Depreciating assets (kitchen equipment, technology, millwork, fixtures): approximately $180,000 with effective lives of 3 to 15 years. Estimated total first-year depreciation deduction: $30,000 to $50,000, depending on asset mix and applicable instant asset write-off provisions. Specific deductions require an accountant’s verification.
Lease End Considerations
The 5-year lease (with 5-year option) raises questions about what happens to the fit-out at lease end. Make-good provisions in the lease determine whether the fit-out must be removed (at whose cost) or may remain. The cafe owner should review make-good obligations carefully before signing the lease; a substantial fit-out investment combined with restrictive make-good provisions can result in material costs at lease end. The loan term (7 years for fit-out, 5 years for equipment) is designed to amortise the borrowing within the realistic occupation period.
Sensitivity to Slower Establishment
If the café takes longer to reach steady state than projected (revenue $50,000/month in months 1-6 rather than $80,000/month), the monthly cash flow will be tight or negative during the establishment period. The borrower needs working capital reserves to cover the establishment phase; some lenders include a separate working capital facility ($30,000 to $50,000) alongside the fit-out finance to support the ramp-up. The combined establishment package is $300,000 for fit-out and equipment + $50,000 for working capital = $350,000 total borrowing for the new business.
The Alternative Single-Facility Approach
Instead of separate fit-out and equipment facilities, some lenders offer a combined business establishment facility that covers all fit-out, equipment, and working capital under a single loan. This simplifies administration but typically costs slightly more (averaged pricing rather than category-specific pricing). For complex multi-category establishments, a single facility may be preferable for simplicity, even at slightly higher cost. The trade-off should be evaluated on a case-by-case basis.
Practical Pointers for Fit-Out Borrowers
Several practical habits support good outcomes in fit-out finance and the broader renovation project.
Get Multiple Contractor Quotes
Substantial fit-out work typically benefits from competitive quoting between contractors. Three quotes are a reasonable minimum for major work; understanding the pricing range helps the borrower negotiate effectively and supports the lender’s verification of fit-out costs. Some lenders specifically require multiple quotes as part of their fit-out finance assessment.
Plan Cash Flow Through the Fit-Out Period
Fit-out work typically takes 6 to 16 weeks, depending on scope. During this period, the business often has no revenue (new premises) or reduced revenue (refurbishing existing premises). Cash flow planning needs to cover the fit-out period plus the ramp-up period after opening. Underestimating this requirement is one of the most common errors in fit-out borrowing.
Coordinate Finance with Contractor Payment Terms
Contractors typically require progressive payments: a deposit, milestone payments, final payment on completion. Fit-out finance drawdown should align with this schedule so funds are available when contractors invoice. Mismatched timing creates cash-flow stress; planning the drawdown schedule with the lender before contracts are signed helps avoid it.
Review Make-Good Implications Before Signing the Lease
For leased premises, make-good obligations at lease end can significantly affect the true cost of fit-out investment. Reviewing make-good provisions before signing the lease (with both a commercial property solicitor and a commercial broker familiar with the implications) can identify problematic provisions before they become locked in. Sometimes specific make-good clauses can be negotiated; at other times, the fit-out approach should be modified to reduce make-good exposure.
Get Tax Advice Before Committing
The tax treatment of fit-out costs can materially affect the after-tax cost of the work. An accountant familiar with commercial fit-out can advise on optimising the categorisation between capital works and depreciating assets, identifying items qualifying for accelerated depreciation, and structuring the work to maximise tax efficiency. This advice should be obtained before contracts are signed, when the structure can still be optimised.
Maintain Detailed Records
Fit-out records support both ongoing tax deductions and potential future sale, refinance, or insurance claims. Comprehensive records include contractor invoices and contracts, payment evidence, design documentation, equipment specifications, and any related professional advice (architect, designer, accountant). Records should be retained for at least the life of the depreciation period plus 5 years.
Plan for Future Refresh
Fit-out has a finite useful life; most commercial fit-outs need refreshing every 5 to 10 years to maintain commercial appeal and meet evolving operational requirements. Planning for the next refresh from the start (building reserves, maintaining the fit-out, anticipating refresh cycles) helps avoid being caught short when a refresh becomes necessary. Some businesses budget a percentage of annual revenue toward future fit-out refresh.
Where to Read About Capital Works Tax Treatment
The tax treatment of fit-out and capital improvements is set out in detail by the Australian Taxation Office, covering shop fit-outs, leasehold improvements, and broader capital works on commercial property. While the rules are technical, understanding the framework helps borrowers engage productively with their accountants about how to structure fit-out spending for tax efficiency.
The Australian Taxation Office’s guidance on capital works deductions for fit-outs and improvements explicitly covers shop fitouts and leasehold improvements, including the deduction rates (typically 2.5% or 4% per year) and the categories of work that qualify for capital works deductions. While the page is technical and most borrowers will rely on their accountant to apply the rules, understanding the framework helps borrowers anticipate the tax treatment of major fit-out decisions and avoid surprises in tax outcomes.
Frequently Asked Questions (FAQs)
1. How much can I borrow for a fit-out?
Most fit-out lenders cover 70% to 85% of total fit-out costs, with established borrowers in strong sectors sometimes achieving 100% finance. The specific amount depends on the borrower’s financial strength, the lender’s view of the business and sector, and the type of fit-out work. Modest fit-outs (under $100,000) are typically easier to finance at full cost than larger fit-outs. Specialist or unusual fit-out (high-tech facilities, specialised equipment) may face tighter LVR caps.
2. Can I include the cost of new equipment in my fit-out loan?
Yes, sometimes, but it’s often more efficient to finance equipment separately through dedicated equipment finance. Equipment finance typically offers competitive rates (the equipment provides clean security), and its typical term (3 to 5 years) usually better matches the equipment’s useful life than a longer fit-out loan term. Some borrowers combine all costs into a single facility for simplicity; others split them to optimize pricing across categories. A specialist commercial broker can advise on the optimal split.
3. Do I need to be the property owner to get fit-out finance?
No, fit-out finance is available for both leased and owned premises. In fact, most fit-out finance is for leased premises since most businesses lease rather than own their operating premises. The loan is secured against the fit-out itself and supported by personal guarantees from directors; property ownership is not required. However, the lease terms (length, security of tenure, make-good obligations) affect what fit-out finance is available.
4. What happens to the fit-out if my business fails?
This depends on the lease and the loan structure. If the business fails and the lease ends, the fit-out typically must be removed under make-good provisions (or abandoned with associated costs). The fit-out loan typically becomes immediately payable, with the lender pursuing the fit-out assets first (limited realisable value), then the personal guarantors. This is one of the risks of substantial fit-out investment that borrowers should understand before committing. Comprehensive business insurance and careful cash flow planning reduce but don’t eliminate this risk.
5. Can I deduct fit-out costs from tax?
Yes, but the treatment varies. Capital works (structural elements) are typically depreciated at 2.5% or 4% per year over 25 to 40 years. Depreciating assets (fixtures, fittings, equipment) are deducted over their effective life (3 to 15 years typically). Repairs are typically immediately deductible. The specific treatment of any particular item depends on its category, and the categorisation can significantly affect the deduction timing. An accountant familiar with commercial fit-out should advise on the specific tax treatment.
6. How long does fit-out finance approval take?
Typically, 2 to 6 weeks from application to formal approval, depending on the lender, the complexity of the fit-out, and the borrower’s profile. Straightforward fit-out finance for established businesses with strong documentation can be approved within 2 to 3 weeks; more complex situations (specialised work, unusual borrowing profile, multiple facilities) can take 4 to 6 weeks. Borrowers should factor this timing into the broader fit-out project timeline; rushed approvals often produce worse terms.
7. Should I get a separate working capital facility alongside fit-out finance?
Usually yes, particularly for new business establishment or substantial refurbishment that disrupts operations. Working capital covers the gap between fit-out completion and the business reaching steady-state operations, which typically takes 3 to 12 months, depending on the business type. Underestimating working capital is one of the most common errors in fit-out borrowing; building a separate working capital facility from the start provides the resilience to absorb slower-than-projected ramp-up. The specific working capital sizing should be modelled against worst-case ramp-up scenarios.
The Bottom Line
Commercial fit-out finance is a distinct lending category designed to fund the renovation, refurbishment, equipment installation, and capital improvements that transform commercial premises into operational business space. Typical structures include 70% to 85% LVR (occasionally 100%), 3- to 7-year terms matching the useful life of the fit-out, security through both the fit-out assets and personal guarantees, and pricing at 1% to 3% above commercial property rates. Fit-out is typically kept separate from property finance because the loan term, security, and risk profile differ from property lending.
For most fit-out borrowers, the smartest approach is to scope the work comprehensively before approaching lenders, obtain multiple contractor quotes to support the costing, engage an accountant on tax treatment before contracts are signed, coordinate fit-out finance with any related property and equipment finance, and ensure working capital is available to support the establishment phase. A specialist commercial broker familiar with fit-out lending typically produces materially better outcomes than approaching lenders directly, particularly for complex multi-category establishments. Fit-out done well sets the business up for long-term operational success; fit-out done poorly (under-budgeted, over-borrowed, badly structured) creates difficulties that compound throughout the lease period or property ownership.
