Office refurbishments can cost anywhere from $50,000 for a modest fitout to several hundred thousand for a full transformation. Asset finance lets you spread that cost over time while keeping working capital available for day-to-day operations.
What Asset Finance Covers in an Office Refurbishment
Asset finance typically covers the tangible items that go into your workspace, including office equipment like desks, chairs, storage systems, and technology such as computers, servers, and phone systems. It also extends to fixtures that can be removed without damaging the building structure.
Consider a professional services firm relocating to a larger Brisbane office. They needed 25 workstations, a boardroom fitout, kitchen facilities, and a server upgrade. The total equipment cost sat at $180,000. Rather than drawing down that amount from their business account, they structured a chattel mortgage over four years with fixed monthly repayments of around $4,200. The firm could claim depreciation on the assets and deduct the interest component, while the equipment itself secured the loan.
Building works like walls, flooring, electrical, and plumbing generally fall outside standard asset finance structures because they're considered improvements to the landlord's property rather than removable business assets. If your refurbishment includes both, you might need a combination of equipment finance for the movable items and a separate working capital loan or fit-out loan for the structural work.
How Chattel Mortgages Work for Office Equipment
A chattel mortgage is a loan secured against movable business assets. You own the equipment from day one, claim the full GST input credit upfront if registered, and depreciate the assets through your tax return.
The structure suits businesses with consistent revenue because repayments stay fixed regardless of the equipment's declining value. At the end of the term, you own the assets outright. There's usually a residual or balloon payment built in, typically between 10% and 30% of the original loan amount, which reduces the monthly repayment but leaves a lump sum due at the end.
For the professional services firm mentioned earlier, the $180,000 loan included a 20% residual. That brought the balloon payment to $36,000, due at the four-year mark. The lower monthly repayment helped manage cashflow during the first two years in the new premises when client acquisition was the priority. They refinanced the residual when it came due, spreading it over another two years at a lower loan amount.
Finance Leases and Operating Leases as Alternatives
A finance lease keeps the asset off your balance sheet and spreads the cost over an agreed term. The lender owns the equipment, you make fixed monthly repayments, and at the end of the lease you can either purchase the asset for its residual value, upgrade to new equipment, or return it.
This option suits businesses that want to preserve capital and maintain flexibility around their upgrade cycle. Operating leases work similarly but are structured so the lease term is shorter than the asset's useful life, and residual values are higher. They're less common for office refurbishments because furniture and technology tend to have long usable lifespans and businesses generally prefer to own them outright.
Both lease types offer GST treatment where the GST is included in the repayment rather than paid upfront, which can help cashflow if you're not registered for GST or if you prefer to smooth the expense.
How Interest Rates and Repayment Terms Are Determined
Interest rates for commercial equipment finance typically sit above standard home loan rates but below unsecured business lending. Rates depend on the loan amount, the equipment type, the term length, and your business's financial position.
Longer terms reduce the monthly repayment but increase the total interest paid. Shorter terms do the opposite. Most office equipment finance runs between three and five years, matching the functional life of the assets. Technology items like servers and computers might warrant shorter terms given their faster depreciation, while quality furniture can justify longer ones.
A balloon payment reduces the repayment during the loan term but requires planning for the lump sum at the end. Some businesses refinance the residual, others use surplus cashflow to pay it out, and some trade in or sell the equipment and apply the proceeds to the balance.
Tax Benefits and Depreciation Considerations
When you own the equipment through a chattel mortgage, you can claim depreciation as a tax deduction based on the asset's effective life. Office furniture typically depreciates over 10 to 13 years, computers and technology over 3 to 5 years, and other equipment according to ATO guidelines.
You also claim the interest portion of each repayment as a business expense. If you're GST-registered, you claim the full GST input credit in the first Business Activity Statement after purchase, even though you're financing the cost.
Under a finance lease, you can't claim depreciation because you don't own the asset, but the full lease payment is typically tax-deductible as an operating expense. The GST is included in each repayment, so you claim a portion of GST input credit each month rather than upfront.
Depending on your business structure and revenue, one approach might deliver better cashflow or tax outcomes than the other. If you're weighing up whether to finance or pay cash, consider how tying up capital affects your ability to respond to other opportunities or cover operating expenses during quieter periods.
Structuring Finance Around Cashflow and Business Growth
Office refurbishments usually happen alongside growth or change. You're either expanding, relocating, or repositioning your brand. Financing the equipment means your capital stays available for hiring, marketing, or covering the transition period when revenue might dip.
If your business has seasonal cashflow, you might structure repayments with a higher residual to keep monthly costs lower, then use peak periods to make additional payments or clear the balloon at the end. If cashflow is consistent, a lower residual or no residual reduces the total interest paid and removes the lump sum obligation.
Some lenders offer deferrals or tailored repayment schedules for businesses with uneven income, though these options depend on your financial position and the strength of your application. If you're combining equipment finance with other funding for the refurbishment, make sure the repayment schedule across all facilities aligns with your projected cashflow rather than stretching your capacity.
Preparing Your Application and What Lenders Assess
Lenders assess your business's ability to service the repayments based on recent financials, trading history, and the purpose of the equipment. They'll typically ask for business tax returns, profit and loss statements, bank statements, and details of the equipment you're financing.
If you're a newer business or your financials don't reflect the current trading position, be prepared to explain the context. A detailed quote or invoice for the equipment is usually required before approval, and the lender may want to verify the supplier.
Because the equipment acts as collateral, the lender will assess whether it holds sufficient value relative to the loan amount. Mainstream office furniture and technology are generally well-supported. Custom or highly specialised items might require additional explanation or a larger deposit.
If you're financing a refurbishment across multiple suppliers, you can often consolidate the equipment into one facility rather than managing separate agreements for each purchase. This simplifies administration and can sometimes improve the rate or terms by increasing the overall loan amount.
Call one of our team or book an appointment at a time that works for you. We'll work through your refurbishment plans, talk you through the finance options, and help structure something that suits your business and your cashflow.
Frequently Asked Questions
Can I finance both the building works and equipment for an office refurbishment?
Asset finance typically covers movable items like furniture, technology, and removable fixtures. Building works such as walls, flooring, and electrical upgrades usually require a separate facility like a fit-out loan or working capital loan because they're improvements to the landlord's property.
What's the difference between a chattel mortgage and a finance lease for office equipment?
A chattel mortgage means you own the equipment from day one, claim depreciation, and pay GST upfront if registered. A finance lease keeps the asset off your balance sheet, the full repayment is usually tax-deductible, and GST is spread across the lease term.
How long are the repayment terms for office equipment finance?
Most office equipment finance runs between three and five years, depending on the asset type and your business needs. Technology items like computers might suit shorter terms, while quality furniture can justify longer ones.
What do lenders assess when you apply for asset finance for a refurbishment?
Lenders review your business financials, trading history, and the equipment details. They'll typically ask for tax returns, profit and loss statements, bank statements, and a detailed quote or invoice for the items you're financing.
Can I include equipment from multiple suppliers in one finance facility?
Yes, you can often consolidate equipment from multiple suppliers into one facility rather than managing separate agreements. This simplifies administration and may improve the rate or terms by increasing the overall loan amount.
