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Financing your fit-out through escrow

When financing a practice fit-out, medical professionals should consider the benefits of an escrow arrangement

Managing the fit-out of a medical practice can be an incredibly stressful task, but it doesn’t have to be with expert guidance.

Starting out with the right contractors and financing options is crucial. While some people have broad knowledge of finance facilities such as a lease or chattel mortgage, most are unaware of escrow being an option.

BOQ Specialist’s Commercial Finance Consultant, Thomas Wald, says “when most people approach the bank for fit-out funding, they know how much they need for the project but they do not really understand the financing options, or the optimum way for making payments to builders and other suppliers. They often expect to negotiate a lease or chattel mortgage straight up.

“For these kinds of transactions, those facilities don’t have the flexibility of escrow,” Thomas says.  “Escrow is an excellent option for fit-outs because it provides the client with flexibility while keeping the finance side of the project as simple and streamlined as possible.”

Escrow explained

Fit-outs are a large investment for any practice and while it is important that you choose the right assets and equipment, it is equally vital that you choose the right kind of financing.

Escrow is an account held by a third party that acts as a short-term line of credit which can be used during a fit-out. One of the key advantages for medical professionals fitting-out their practice or rooms is that it allows them to make variations or changes along the way, such as opting for higher-end furnishings or different office equipment to what was initially anticipated.

“The escrow facility allows the client to pay any supplier at their own discretion,” Thomas says. “They can pay additional funds to the same supplier or a new supplier as needed, and they are only charged for funds they use, when they use them.”

It is common, for example, for a client to take out a $500,000 limit and then only end up needing $400,000. “But they’re not going to be charged for that extra $100,000 unless they actually use it.”

An escrow facility can cover everything from dry walling through to payments for carpets, windows, paint and plumbing. What’s more, to make the process simple for you, BOQ Specialist can manage the payments to suppliers throughout the project under your instruction. Thomas says the facility “nicely wraps up” all the financial elements of a fit-out for medical professionals —payments are simplified as the invoices can come from all different vendors but the bank keeps a full record of all transactions and then issues one invoice to the client for tax purposes. “The facility takes away all the financial and accounting pain points you might encounter as a practice owner during a fit-out.”

Another key benefit of an escrow facility is that you are not required to make any payments until the project is finished and the final amount loaned can be rolled into a longer-term agreement with fixed repayments. This key feature makes escrow a particularly attractive option for new practice owners, who won’t have to start paying off their fit-out until it is complete and their doors are likely open for business.

Having an escrow facility with a niche financier such as BOQ Specialist, means medical professionals can leverage their industry partners and access building companies that have proven fit-out expertise. Thomas says, “We deal with the same companies all the time who specialise in medical fit-outs. These longstanding relationships benefit the client as we can work with the fit-out companies to push the larger payments towards the end of the project to reduce the total amount of interest they accrue while in escrow.”

For instance, if you draw down on the largest fit-out payment in the last four days of the escrow phase, you will only be charged the annual rate for a period of four days. “So for people who are new to fit-outs, it adds industry knowledge and gives them peace of mind that they’re not paying too much too soon for the vendors.”

Positive impact on cashflow

Thomas says an escrow facility could also have significant benefits for a business’s cash flow.

“The beauty of the facility is that you don’t need to make any repayments until the fit-out has been completed, the practice is open and patients are walking through the door. So, in terms of cashflow it’s great. “This allows the client to focus on building their billings, rather than worrying about making repayments when they might not yet have that desired patient flow.”

Under the escrow arrangement, the bank pays all builders, contractors and suppliers, while you can also get reimbursement for any other payments that may be incurred from individual retailers, such as televisions, chairs or speakers for a reception area.

Once the project is finished, the escrow can be converted to a flexible repayment structure, which can be fixed or variable, or even have repayments that incrementally increase over time to meet the gradual increase in patients. If the escrow is converted to a loan or hire purchase product, you will generally have the ability to immediately claim back any GST payments made during the fit-out. “So if you spend $500,000, you can generally get 10 per cent back on GST when the escrow converts to a loan or hire purchase product” Thomas says.

BOQ Specialist can outline all the details and benefits of an escrow facility, and take medical professionals through the relevant repayment options. “Our clients really like the flexibility that escrow gives them and it’s specifically designed for fit-outs or construction projects, so it’s a great choice,” Thomas says.


As with any major financial transaction, it is important to receive specific advice that suits your business’s circumstances. To find out more ways we can help you with fitting out a practice, contact your local finance specialist today on 1300 160 160 or or to learn more, take a look at our fit-out finance options to see how we can tailor a finance solution for you.

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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.