Top Strategies to Finance Your Restaurant Fitout

A restaurant fitout can run anywhere from $150,000 to well over $500,000 depending on the size of your venue and the condition of the space you're taking over.

Most of that spend sits across commercial kitchen equipment, refrigeration, ventilation systems, front-of-house furniture, point-of-sale technology, and bar infrastructure. Paying for all of that upfront drains the working capital you need to cover wages, stock, and the inevitable slow weeks in your first six months of trading. Asset finance lets you spread the cost across the income-generating life of the equipment while keeping enough cash in the business to actually operate.

What Asset Finance Covers in a Restaurant Fitout

Asset finance covers any tangible equipment that generates income or supports the operation of your business. For a restaurant fitout, that includes commercial ovens, grills, fryers, dishwashers, coolrooms, freezers, prep benches, extraction systems, espresso machines, furniture, and point-of-sale hardware. It also extends to audio systems, lighting rigs, and outdoor heating if those items form part of the customer experience. The key requirement is that the equipment has a resale value and can serve as collateral for the loan. Leasehold improvements like tiling, plumbing, or structural work usually fall outside the scope of equipment finance and need to be funded separately through a fitout loan or working capital facility.

Chattel Mortgage vs Lease for Restaurant Equipment

A chattel mortgage suits operators who want to own the equipment outright and claim depreciation as a tax deduction. You borrow the full amount, take ownership from day one, and make fixed monthly repayments over a term that typically runs between three and five years. At the end of the term, you own the asset. You can also structure a balloon payment at the end to reduce monthly repayments during the loan term, which helps if cashflow is tighter in the first year.

A finance lease works differently. The lender owns the equipment throughout the lease term and you make regular payments to use it. At the end of the lease, you can refinance the residual, upgrade to newer equipment, or return it. Lease payments are usually fully deductible as operating expenses, which can suit operators with strong cashflow who prefer not to carry depreciating assets on the balance sheet. The trade-off is that you don't own the equipment unless you pay out the residual at the end.

How Fixed Monthly Repayments Help With Budgeting

Most commercial equipment finance structures lock in a fixed interest rate, which means your repayments stay the same across the life of the loan. That consistency makes it easier to build accurate cashflow forecasts and commit to staffing or marketing spend without worrying about repayment fluctuations. Variable rate facilities exist, but they're less common in the asset finance space and tend to suit businesses with fluctuating income who want the option to make extra repayments without penalty.

Consider an operator fitting out a 120-seat venue in Fortitude Valley. The kitchen equipment alone totals $220,000, with another $80,000 in furniture and front-of-house technology. Using a chattel mortgage with a fixed rate over five years, repayments sit at a predictable amount each month. That predictability lets the operator commit to a head chef salary and lock in a supplier contract without second-guessing whether a rate rise will squeeze margins three months down the line. The equipment also depreciates across the same period, so the tax deduction aligns with the repayment schedule.

Balloon Payments and When They Make Sense

A balloon payment is a lump sum due at the end of the loan term, typically set at 20% to 40% of the original loan amount. Reducing the amount you repay each month lowers your regular outgoings, which can help in the first year when revenue is still ramping up. The downside is that you'll either need to refinance the balloon, pay it from retained earnings, or sell the equipment to cover the amount owing.

Balloon structures suit operators who expect revenue to grow significantly after the first year or who plan to refinance or sell the business within the loan term. They're less suitable if cashflow remains tight throughout the term, because the balloon becomes a problem when it falls due. If you're uncertain about revenue growth, a standard repayment structure without a balloon removes that end-of-term pressure.

GST Treatment on Equipment Purchases

When you finance equipment under a chattel mortgage, you can usually claim the GST back in your next Business Activity Statement if you're registered for GST. That means a $110,000 coolroom only costs you $100,000 after the GST refund, even though you've financed the full $110,000. You're effectively borrowing the GST component for a few weeks until the ATO reimburses you, which improves your immediate cashflow position.

Under a finance lease, the GST is spread across each lease payment rather than claimed upfront. You claim the GST component of each payment as you make it, which smooths the tax benefit over the life of the lease rather than delivering it in one lump sum. The approach you choose depends on whether you'd prefer the cashflow boost upfront or a steady deduction across the term.

Vendor Finance and Dealer Finance Programs

Some equipment suppliers and manufacturers offer their own finance programs, often called vendor finance or dealer finance. These can be faster to arrange than going through a bank, and occasionally come with subsidised rates if the supplier is trying to move stock. The catch is that you're locked into that supplier's terms, and the interest rate isn't always disclosed as clearly as it would be with a traditional lender.

Before committing to vendor finance, compare the effective interest rate and fees against what a broker can access from a panel of lenders. In our experience, vendor programs can look appealing on monthly repayment amount alone, but the total cost over the term sometimes exceeds a standard chattel mortgage by several thousand dollars.

How Depreciation Works as a Tax Benefit

When you own equipment under a chattel mortgage, you can claim depreciation as a tax deduction each year. Most commercial kitchen equipment depreciates at a rate set by the ATO, typically between 10% and 20% per year depending on the asset class. Refrigeration, cooking equipment, and dishwashers usually fall into higher depreciation brackets, which means a larger deduction in the early years.

That depreciation deduction reduces your taxable income, which in turn lowers the amount of tax you pay. The deduction runs in parallel with your loan repayments, so you're reducing both your debt and your tax liability at the same time. If you're operating under a lease structure instead, you won't claim depreciation because you don't own the asset. Your deduction comes from the lease payment itself, which is fully deductible as an operating expense.

Structuring Finance Across Multiple Suppliers

Most restaurant fitouts involve equipment from multiple suppliers: one for kitchen equipment, another for refrigeration, a third for furniture, and a fourth for point-of-sale systems. You can structure a single finance facility that covers all of those purchases, even if the invoices come from different vendors. That consolidates your repayments into one monthly amount and avoids the administrative burden of managing multiple loan agreements.

The lender typically pays each supplier directly once you provide the tax invoices and delivery confirmations. That means you're not fronting the cash and then claiming reimbursement. The process works smoothly as long as you provide the documentation promptly and the suppliers invoice correctly.

When to Use Working Capital Alongside Equipment Finance

Equipment finance covers the tangible assets, but it doesn't cover leasehold improvements, initial stock, licencing fees, or the first three months of wages. Those costs need to be funded separately, usually through a working capital loan or retained earnings. Mixing the two funding sources gives you the cash to cover the fitout and the operating expenses to get through your first trading period without running out of runway.

Some operators try to stretch equipment finance to cover everything by inflating invoices or bundling leasehold work into equipment quotes. That approach creates problems at settlement when the lender's valuer picks up the discrepancy, and it can void the finance approval altogether. Splitting the funding sources cleanly from the start avoids that risk and keeps the approval process moving.

Call one of our team or book an appointment at a time that works for you. We'll help you structure the right mix of equipment finance and working capital so your fitout budget actually gets you to opening night with cash still in the bank.

Frequently Asked Questions