Medical practice fit-out and equipment finance vs a property loan

The property holds its value and can be sold to anyone; the lender lends long against it. A medical fit-out is worth a fraction of its cost to anyone but a medical tenant, and equipment depreciates fast. Lenders will not lend 25 years against something that is worth little in five, so they finance fit-out and equipment on shorter terms secured on the items themselves, with the practice cash flow servicing the repayments. Some medico lenders will roll structural fit-out into the property loan where it adds to the building's value.

A fit-out loan funds the building works: partitions, plumbing for consulting rooms and sterilisation, electrical, flooring, reception and compliance works. It is usually an unsecured or property-secured business loan over five to seven years, sometimes with progress draws to the shopfitter. Medico lenders offer fit-out loans to eligible practitioners at up to 100 per cent of cost for established practices; other lenders want a contribution or additional security.

Chairs, imaging, ultrasound, autoclaves, lasers, gym and treatment equipment and practice IT are financed on a chattel mortgage, where the practice owns the asset and the lender takes security over it, or on a lease or hire purchase. Terms of three to seven years, sometimes with a balloon. The interest and depreciation, or the lease payments, are deductible to the practice, and the instant asset write-off rules can apply to smaller items.

A practitioner buying rooms and fitting them out might have a $1,200,000 property loan over 25 years, a $300,000 fit-out loan over seven years and $250,000 of equipment finance over five years, all with one lender under a combined healthcare facility, or spread across a property lender and an equipment financier where that produces better pricing. A specialist will price both approaches and structure the entities so the property sits where the practitioner's accountant wants it.