How to fund a fit-out: what can be financed, what can't and who pays

A fit-out quote arrives as one large number, and one large number is the hardest thing to finance. A lender asked to fund “$180,000 for the fit-out” has to guess what is in it. Is it benches that could be sold, or paint on a wall that belongs to someone else?

The fastest way to improve your funding position is to stop treating the fit-out as one project. This guide shows how to cut the quote into pieces that finance differently, who else might pay for some of them, and how to avoid being locked into debt for a space you’ve left.

How should I break down a fit-out quote?

Ask your builder, designer or supplier for the quote in three groups. If they won’t split it, split it yourself from the line items.

Group	Examples	Why it matters
Movable equipment	Ovens, fridges, benches, chairs, desks, display cabinets, point-of-sale, signage on stands	A lender can secure these and you can take them if you leave
Fixed construction	Walls, ceilings, plumbing, electrical, flooring, joinery, ventilation	Becomes part of the building, so it has little resale value to a lender
Soft costs	Design, permits, certifier fees, project management, insurance, delays	Often forgotten; usually can’t be financed as an asset

Think of it this way. The more of the quote that sits in the first group, the easier and cheaper it is to fund. The more that sits in the second, the more you rely on the strength of the business and any security you offer.

What can the landlord contribute?

This is the cheapest money in the project, and the one most tenants leave on the table. Landlords with vacant space often prefer to give an incentive than to drop the rent, because the headline rent supports the building’s value.

• A fit-out contribution. A lump sum or reimbursement toward the works.
• A rent-free period. Typically a few months at the start, which lets you trade through your slowest period without paying rent.
• A stepped rent. Lower early rent that rises as you establish.
• Landlord works. The landlord does some construction, such as air conditioning or amenities, as part of the lease.

Ask for these before you sign, and make sure they’re written into the lease or a side letter. Once you’ve signed and spent, the leverage is gone. Longer lease terms and well-regarded tenants generally have more bargaining power. For the broader question of leasing versus owning your premises, see buying premises versus leasing.

How do I fund the equipment part?

Equipment is the straightforward part, because the lender holds a claim on something tangible. Equipment finance and chattel mortgages are usually the first choice, with the term matched to the useful life of the equipment.

Two points specific to fit-outs:

1. Landlord waivers. Equipment installed in leased premises can lead the financier to ask your landlord for a landlord waiver, confirming they can retrieve the equipment if repayments stop. Ask early, as landlords can take weeks to respond.
2. Tax timing. The instant asset write-off threshold is $20,000 from 1 July 2026 for businesses with turnover under $10 million, according to the ATO. It applies per asset, so a fit-out with many separate items may qualify in part. Fixed building works are generally treated differently. Our guide to the instant asset write-off and equipment finance explains the interaction, and your accountant can confirm what applies to your quote.

How do I fund the fixed work and soft costs?

This is the part that doesn’t carry its own security, so the lender looks at the business instead.

• A term loan over a longer period, which keeps repayments manageable while the new space starts earning.
• A line of credit, drawn as invoices fall due, so you pay interest only on what you have used.
• Progress payment finance, where the builder is paid in stages and funding follows the milestones. See progress payment finance.
• Property-secured finance, where an owner offers property as security to widen the options. It’s worth thinking carefully about this one: our guide to the risks of using your home as business security explains why.
• Cash from the business. Worth using for soft costs and the first stage payment, so the borrowing stays smaller.

A bank can be a good fit for this kind of borrowing if you meet its criteria and have a long history with it. If the bank has said no, or wants more security than you have, there are lenders who work from bank statements and trading history instead. The shop fit-outs, office fit-outs and commercial kitchen fit-outs pages go into each type.

Got a quote in hand? Send us the split and the timing and we’ll look at how to fund each part.

How do I match the loan to the lease?

This is the point many tenants miss. A fit-out improves a building you do not own. When the lease ends, the fixed part stays and the debt remains.

Rules of thumb:

• Don’t borrow beyond the lease term for fixed works. If you have a five-year lease with a five-year option, plan on the first five years.
• Read the make-good clause. It may oblige you to strip out the fit-out at the end, which turns a one-off cost into a two-ended one. Put an estimate in your budget and ask whether the landlord will waive it for improvements they value.
• Check assignment rights. If you might sell the business, a fit-out is part of what a buyer is paying for, and the lease must allow it to be transferred.
• Keep the equipment portable where possible. Equipment you can move is equipment you can sell, finance or take to the next site.

How should I stage the payments?

Fit-outs run over budget and past deadline more often than they come in early, and the way the money goes out affects your cash.

1. Agree the payment schedule in writing, tied to milestones rather than dates.
2. Hold back a retention if the contract allows it, so there’s leverage to fix defects.
3. Add a contingency of 10 to 15 per cent to the budget. If you don’t use it, you’ve saved it. If you do, it won’t be a crisis.
4. Plan for the dead time. You’ll pay rent and sometimes wages before the doors open. Many owners forget this cost and need working capital to bridge it.
5. Get variations in writing. Small changes add up quickly.

Check your builder’s licence and insurance with the relevant state authority before paying a deposit. Each state publishes licence registers and rules on deposits.

A worked example: the cafe’s second fit-out

This is an illustrative example. A cafe owner leases a corner shop for five years with a five-year option. The builder quotes $210,000 plus equipment. The owner asks for a three-part split:

Group	Amount
Movable equipment (coffee machines, fridges, display, tables, POS)	$78,000
Fixed construction (plumbing, electrical, flooring, joinery, exhaust)	$104,000
Soft costs (design, permit, insurance, contingency)	$28,000
Total	$210,000

The landlord agrees to a $25,000 contribution and two months’ rent-free. That brings the fixed work down to $79,000. The owner finances the $78,000 of equipment over five years against the equipment itself, funds the remaining fixed work with a term loan matched to the lease, and pays the soft costs from the business’s own cash flow. The make-good clause is reduced to removal of loose items.

Total borrowing is $157,000 instead of $210,000. Some of the equipment may qualify for the $20,000 write-off per item, and the owner’s accountant works that out before the invoices arrive.

Mistakes to avoid when funding a fit-out

• Taking a single, unsplit quote to a lender.
• Not asking the landlord for a contribution until after signing.
• Taking a loan that lasts longer than the lease.
• Forgetting soft costs, delays and the weeks of rent before opening.
• Skipping the contingency.
• Overlooking the make-good clause.

Ready to fund your fit-out?

A fit-out is one of the largest single outlays a growing business makes, and one where an hour of structuring pays for itself. If you can show the split, the landlord’s contribution, the lease and the timing, you’ll get a faster, clearer answer.

Our enquiry takes about a minute, and enquiring does not involve a credit check, so there’s nothing to worry about for your credit file. We don’t send your details out to a long list of lenders, so you will not be chased by a stream of calls. A real person reads your enquiry and phones you. The more accurately you describe the project and the lease, the sooner we can work out what is likely to suit.

Get your fit-out funding looked at →