Room to move

While it’s true that COVID has wreaked havoc on the medical and dental fit-out market, leading to delays and higher costs, it’s also true that it’s easier managing these difficulties thanks to help from BOQ Specialist.

In theory, medical and dental fit-out companies should be immune to the staffing pressures that have plagued other firms since the pandemic. Subcontractors to these companies are generally specialists themselves in this kind of work. Nonetheless, other factors have contributed to a slowdown in the medical and dental fit-out business, including the ongoing issues with supply of materials into the country, and efforts by the central bank to control inflation.

“We’ve seen pressure in that market since early this year,” says Tim Bowring, NSW State Manager and Head of Partnerships, BOQ Specialist. “The post-COVID supply chain challenges were starting to make it very hard. Then you have a compounding effect on top of that from the Reserve Bank raising interest rates. In particular, fixed-rate swap markets have increased by 350 basis points or 3.5% since the start of September so the cost of actually financing a practice fit-out has become much more expensive.”

According to Tim, the market for medical and dental fit-out is usually quite stable and less exposed to such external pressures. “The difference between a practice fit-out versus a ground-up construction is the window of doing the work, with fit-out generally taking between six to 12 weeks. So, in terms of managing costs throughout that process, as long as you can get supply, you can more or less keep to what your forecast is going to be. When you are building a commercial premises, by contrast, the build time is 12 months or 18 months, so you are obviously more exposed to cost pressures in the market.”

However, unexpected delays in the supply of either building materials or equipment can halt projects midway through. This leads to unexpected cost rises— which are especially problematic during a period of high inflation.

Then to combat the inflation, central banks continue to raise interest rates. Tim says. “We’ve had record low interest rates for seven or eight years now, and we've become so used to fixing our home loans for five years at less than two per cent. Now you’re being told to pay up to seven per cent for your fit-out, so the gap is quite jarring.”

Easy money

The way BOQ Specialist is helping clients to manage those twin headaches of delays and costs is through their escrow facility. “It’s effectively an approved line of credit,” Tim explains. “The client will send us an invoice or a progress claim for a fit-out build, and we will draw down on that facility for them.”

Once the fit-out period is finished, BOQ Specialist will convert that escrow facility into an asset finance facility. “The benefit for the client is that we can 100 per cent fund the escrow facility - they don't need to put any cash into it or start repaying it until the practice is up and running.”

BOQ Specialist also regularly runs promotions with their fit-out supplier partners that may offer cash flow benefits such as ‘no interest’ or ‘no repayments’ periods, if a particular supplier is used. This means clients could step into their practice and start generating income for six months to a year before they have to think about paying anything back.

However, the real advantage, Tim says, is the lack of limits in terms of drawdown size or number of transactions. “Many other banks will have a maximum number of drawdowns on a facility, or disallow drawdowns smaller than $2000, or there might be $150 charge per drawdown. Ours is much more flexible; we will pay any invoice and there is no limit on the number of invoices either.”

It’s this flexibility that takes pressure off practitioners when managing and administering their fit-out, particularly in this current environment. BOQ Specialist can do this because of their decades of experience in these markets, and the long and deep relationships with these markets’ suppliers. As money management often isn’t a key strength of medical and dental professionals, BOQ Specialist removes that burden by working with suppliers to help clients get the most out of their finance. Whether that be from their escrow facility, joint supplier promotions, taking advantage of government incentives, or knowing how to best structure invoices so the largest ones are due at the end of the project to minimise interest. It’s that kind of specific knowledge and experience that can leave practice owners reassured that their best interests are being looked after.  


To make the most of the temporary tax incentives take a look at our fit-out finance options, or contact one of our financial specialists today on 1300 160 160.

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      The issuer and credit provider of these products and services is BOQ Specialist – a division of Bank of Queensland Limited ABN 32 009 656 740 AFSL and Australian credit licence no. 244616 (“BOQ Specialist”). Terms, conditions, fees, charges, eligibility and lending criteria apply. Any information is of a general nature only. We have not taken into account your objectives, financial situation, or needs when preparing it. Before acting on this information, you should consider if it is appropriate for your situation. BOQ Specialist is not offering financial, tax or legal advice. You should obtain independent financial, tax and legal advice as appropriate.