Funding the build rather than paying for it out of working capital while you are also trying to fill the appointment book.
What counts as fit-out
- Treatment room construction and partitioning
- Plumbing, electrical and ventilation for clinical use
- Reception, waiting area and consultation space
- Flooring, lighting and decoration
- Fixed cabinetry and clinical storage
- IT infrastructure, networking and practice management systems
- Signage and external works
Leasehold or freehold changes the route
On freehold premises, fit-out can often be rolled into a commercial mortgage or funded by releasing equity, which is usually the cheapest route because it is property-secured over a long term.
On leasehold, that is not available, because you are improving someone else’s building. Funding then comes through asset finance for the identifiable equipment element, and unsecured lending for the rest.
That second point catches people out. A clinic assuming it can fund a £120,000 leasehold fit-out on property-secured terms is usually disappointed. Establish the route early so the budget is realistic.
The landlord conversation
Before committing to a substantial leasehold fit-out, three things are worth settling with the landlord:
- Lease length. Spending heavily on a lease with a short unexpired term is rarely sensible, and lenders will notice.
- Dilapidations. Understand what you will be required to reinstate at the end. Clinical fit-out can be expensive to remove.
- Contribution. Landlords will sometimes contribute to fit-out or offer a rent-free period, particularly on a longer term. It is worth asking.
Budget for the gap
A fit-out has a build period during which the space generates nothing while costs are incurred. If you are relocating, you may be paying for two premises at once.
Fund the working capital alongside the build cost rather than assuming trading will cover it. Running short in the final fortnight of a fit-out is a common and entirely avoidable problem. See working capital finance.
Common questions
Can a new clinic fund a fit-out?
Asset finance for the identifiable equipment element is usually the most accessible route, because the security sits in the assets. The building works element is harder without trading history, and generally needs a larger personal contribution.
Is it better to fund the fit-out or the equipment?
Usually both, but separately. Equipment on asset finance and building works on an unsecured or property-secured facility is normally cheaper than one blended facility. See aesthetic and laser equipment finance.
Can I include the fit-out in a practice purchase?
Often yes. Where a practice needs immediate investment, building that into the purchase funding is generally cleaner than arranging it separately six months later. See practice purchase finance.
All figures are indicative and subject to lender assessment, your circumstances, valuation and prevailing market conditions. Commercial mortgages and unregulated bridging loans are not regulated by the Financial Conduct Authority. Property offered as security may be at risk if you do not keep up repayments.