The fitout finance approach that preserves capital

Opening a restaurant means spending anywhere from $150,000 to $400,000 before you serve your first meal.

Most of that cost sits in the fitout: commercial kitchens, refrigeration, seating, lighting, flooring, and all the infrastructure that turns an empty shell into a functioning venue. If you fund it from savings, you've drained the working capital you need for stock, wages, and the first few months of trading. If you delay the fitout to preserve cash, you delay revenue.

Hospitality equipment finance lets you spread the cost without draining reserves

Commercial equipment finance allows you to fund the full fitout cost through fixed monthly repayments over a set term, typically three to five years. You own the equipment from day one, and the repayments are structured to match your cashflow cycle. The advantage for restaurant owners is that your opening capital stays in the business where it belongs: covering stock, staffing, and the inevitable shortfalls in the first trading quarter.

Consider a cafe owner fitting out a 120-square-metre space in Newtown. The fitout quote comes in at $280,000, covering a commercial kitchen, refrigeration, coffee equipment, seating for 60, and lighting. Rather than withdrawing $280,000 from savings, the owner structures the fitout through equipment finance with fixed monthly repayments of around $6,200 over five years. The capital stays in the business, and the monthly cost becomes a predictable line item in the budget.

Chattel mortgage structures offer tax deductions on both interest and depreciation

A chattel mortgage is the most common structure for self-employed business owners financing restaurant fitouts. You borrow the full amount, take ownership of the equipment immediately, and repay the loan over an agreed term. The advantage is that you can claim both the interest on the loan and the depreciation of the equipment as tax deductions, reducing the effective cost of the finance.

The depreciation component matters more than most people realise. A $280,000 fitout depreciated over five years could generate $56,000 per year in deductions, depending on your accountant's approach and the specific asset class. Add the interest deductions, and the after-tax cost of the finance becomes significantly lower than the sticker rate.

Some lenders also allow a balloon payment at the end of the term, which reduces your monthly repayments during the lease. A 20% balloon payment on a $280,000 loan reduces the monthly cost by around $1,100, which can make the difference between comfortable cashflow and stretched margins in the first year of trading. You either pay out the balloon at the end, refinance it, or sell the equipment if you're upgrading.

GST treatment and how the upfront refund improves cashflow

If you're registered for GST, you can claim the GST component of the fitout cost as an input tax credit in the quarter you purchase the equipment. On a $280,000 fitout, that's a $25,455 refund from the ATO, usually within a few weeks of lodging your BAS. The finance is structured on the full amount including GST, but the refund lands in your account and can be used for working capital or to reduce the loan amount.

This timing advantage is worth understanding. You finance the full $280,000, receive the $25,455 GST refund, and your net outlay drops to $254,545 before you've made your first repayment. Some owners use that refund to cover wages or stock in the opening weeks. Others apply it directly to the loan to reduce the principal and lower the total interest cost.

How a hire purchase structure works when you need vendor finance

Hire purchase is similar to a chattel mortgage, but ownership transfers at the end of the term rather than at the start. This structure is common when you're buying equipment through a supplier who offers vendor finance or dealer finance as part of the package. The monthly repayments are usually comparable, but the tax treatment differs because you don't technically own the asset until the final payment is made.

For restaurant owners, hire purchase makes sense when the equipment supplier has a relationship with a specific lender and can offer faster approval or better terms than you'd get independently. As an example, a commercial kitchen supplier might have an arrangement with a lender that pre-approves fitout packages up to $300,000 for hospitality businesses with an ABN over two years old. The approval happens within 48 hours, and the equipment is delivered on the same terms as a cash buyer.

The downside is that you can't claim depreciation until you own the asset, so the tax benefits are deferred to the end of the term. For that reason, most accountants recommend a chattel mortgage over hire purchase unless the vendor finance terms are significantly better.

Combining fitout finance with working capital to manage the opening phase

The first three months of trading are where most restaurants either stabilise or struggle. You're paying rent, wages, suppliers, and loan repayments before your revenue catches up. Funding the fitout through asset finance preserves your opening capital, but you still need enough liquidity to cover the gap between launch and profitability.

Some brokers structure the fitout finance alongside a cashflow solution such as a working capital line or debtor finance. The fitout is covered by the equipment loan, and the working capital facility covers stock, wages, and overheads until the revenue builds. The two products work together: one preserves capital, the other bridges the gap.

In our experience, restaurant owners who separate fitout costs from operating capital have a smoother opening phase than those who fund everything from savings and then scramble for cashflow in week six.

Call one of our team or book an appointment at a time that works for you. We'll walk through the fitout quote, the finance options that suit your structure, and how to time the GST refund to support your opening phase.

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