What Does Fit-Out Finance Actually Cover? (Including the Costs You Can't See)
Most people assume fit-out finance works like equipment finance: the lender funds a tangible asset, and everything else comes out of your own pocket. On a lot of facilities, that's exactly how it works, and it's why businesses end up funding a large slice of a project in cash without realising there was another option.
It doesn't have to work that way. What can be financed in a commercial fit-out?
The tangible elements
These are the parts every fit-out lender will consider:
Furniture, desking and seating
Partitioning and glazing
Lighting and electrical works
Flooring and ceilings
HVAC and air conditioning
Commercial kitchens and washrooms
Data and IT infrastructure
Fire and security systems
Signage and branding
Joinery and fixed fittings
The intangible elements - where it gets interesting
These are the costs that catch people out, because they're a substantial part of the project and many lenders exclude them entirely:
Design and architectural fees
Labour and installation
Project management
Surveys and consultancy
Making good and dilapidations works
On a typical commercial fit-out, these can account for a third or more of the total. If your facility won't fund them, you're financing the visible half of the project and paying cash for the rest, which rather defeats the purpose of financing it at all.
Why do lenders treat soft costs differently?
Because a lender securing against an asset wants an asset it could theoretically recover. A desk can be repossessed. An architect's fee can't.
Specialist fit-out lenders take a different view. They assess the project and the covenant of the business rather than the resale value of individual items, which is why they'll fund the complete scope. Generalist asset finance providers usually won't, because their credit model isn't built for it.
This is genuinely the main reason fit-out projects come to a specialist broker rather than a high-street bank. It's not always about rate. It's about what's eligible in the first place.
How do stage payments work?
A fit-out isn't delivered on a single day, and it shouldn't be funded as though it is.
Stage funding releases money at agreed points through the project, so your contractor is paid as work completes rather than carrying the delivery cost to the end. That matters to both sides. The contractor isn't financing your project out of their own working capital, and you're not being asked to pay for work that hasn't happened yet.
For suppliers, this is often the thing that makes finance worth offering. Being paid in stages through a six-week programme is a materially different cash-flow position from being paid 30 days after practical completion.
A real example: a £455,000 office fit-out
An accountancy firm came to us for a comprehensive office fit-out: partitions and glazing, flooring, lighting, electrical and data works, fire and security systems, kitchens, joinery, furniture, installation, and the associated intangible costs. The project came to approximately £455,000 plus VAT.
The interesting part is that the firm didn't need to finance it. It was cash rich and had bought the building through its pension fund. It chose finance anyway, for two reasons: to preserve capital for the business, and to access the potential tax advantages of a finance lease.
We arranged a three-year finance lease on a balance-sheet basis, with no personal guarantees and no property security, at pricing more competitive than the firm's existing bank routes. The facility was stage-funded, so the fit-out contractor was paid throughout the programme rather than carrying the project to completion.
What about VAT and tax treatment?
Two points come up on almost every fit-out enquiry.
VAT. - On most fit-out facilities, the lender pays the VAT to your supplier in full at the outset, and you repay it across the term. That removes a significant upfront cash requirement at the exact point in a project where cash is tightest.
Tax treatment. - Depending on how the facility is structured, lease payments may be treated as a deductible business expense, and there may be capital allowance considerations on certain elements. The treatment differs between a finance lease and hire purchase, and it depends on your circumstances.
[This is general information, not tax advice. Clients should take advice from their own accountant on their specific position.]
How long does fit-out finance take to arrange?
For a straightforward project with a limited company borrower and clean accounts, we'd typically expect a lender decision within 24 to 48 hours of submitting a proposal. Getting to that point depends on how quickly we receive the supplier quotation and your financial information.
Larger or more complex projects, or those involving property security, take longer. What shouldn't happen is a project sitting in a queue with no explanation, which is a large part of why people work with a broker rather than going direct.
Frequently asked questions
Can fit-out finance cover design and labour, not just furniture?
Yes, with the right lender. Specialist fit-out facilities routinely fund design fees, labour, installation and project management alongside the physical elements. Generalist asset finance often won't.
Do I need to secure the facility against my property?
Not necessarily. Many fit-out facilities are agreed on a balance-sheet basis without property security or personal guarantees, subject to underwriting and the strength of the business.
Can I finance a fit-out on a leased premises?
Yes. This is common, and lease length is one of the factors a lender will look at when setting the term.
What terms are available?
Fit-out facilities typically run up to five years. The right term usually depends on the lease length and how quickly the business wants the cost off its books.
Talk through a project
If you have a fit-out coming up, or you're a contractor whose clients keep hesitating at the quote stage, the useful first step is a short conversation about the scope and the numbers involved.
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