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Setting up your professional practice right from the outset

Setting up your professional practice right from the outset

Approaching the set-up of your new practice the right way can help you get one step ahead. It's an exciting time, and you will likely want everything in place from day one. The decisions you make around the equipment, the layout, and even the look and feel of your practice will contribute to its ongoing success. However, the cost of practice fit-outs for a start-up can be up to $500,000, so it’s useful to have a clear idea on what your financing options are.

Some of your assets, like equipment, will be income-producing from the beginning. Others, such as software, will be higher depreciating assets. That's why it’s more important that your financing demands are in line with revenues from the outset. The real question to ask is whether that particular piece of equipment or soft cost can wait for a few months until you’re generating income. If it can, then it’s best to hold tight—this will ease some of the cash flow pressure and help you navigate the first few months. Equipment shelf life and industry trends are also important aspects to consider. What seems like cutting-edge gear today can be out of date in a few years. Taking into account the lifetime of a product is essential, as you will want to ensure it pays for itself, as well as assessing its impact on your cash flow.

On the other hand, if it can’t wait and needs to be ordered or installed from the start, there are finance options like an escrow facility which can help with the scheduling of repayments to best suit your needs.

Why escrow?

While a loan or even a credit card are common financing options for fitting out your practice, another option to consider is an escrow facility. This is a master limit facility which can be progressively drawn as you need during the fit-out. The escrow facility allows you to pay any supplier related to the fit-out at your discretion or you can acquire assets using your own funds and reimburse under the facility. In using the escrow facility you are only charged for the funds you use, when you use them.

One of the key advantages of an escrow facility is that it allows you to make variations or changes along the way. It's not uncommon during a fit-out to decide on higher-end furnishings or different office equipment than first anticipated. An escrow facility allows you the flexibility to do that. It is common, for example, for a client to take out a $500,000 limit and then only end up needing $400,000. However, you're not going to pay for that extra $100,000 unless you actually use it.

Another benefit is that an escrow facility wraps up all the financial elements of a fit-out into one simple lending agreement. As the invoices can come at different times from different vendors, these are instead managed by the bank rather than the practice owner. The payments are made on your behalf via the escrow facility and a full record of all transactions is maintained. Then at the end of the fit-out period, the escrow facility is converted into a lease or loan facility or split between both, depending on what is most advantageous for your business’ tax and cash flow needs.

The final key benefit of an escrow facility is that you don't make any payments until the project finishes. The final amount loaned can be rolled into a longer term agreement, such as a chattel mortgage or a lease with fixed or structured repayments. This makes an escrow facility an attractive option for new practice owners as you won’t have to start paying off your fit-out until it is complete and the doors are open for business.

Why BOQ Specialist?

Knowing the market and the right questions to ask when dealing with suppliers can make all the difference. BOQ Specialist has helped finance many practice fit-outs, and know that there are smaller intangible cash flow costs associated with a fit-out. That’s why in addition to the escrow facility, we can provide a cash flow solution via an overdraft facility to manage the initial and ongoing cash flow needs of the business. Understanding the financing options available to you can make the world of difference. Whether you’re just getting started or setting up your fourth practice, our 30+ years of industry experience means we can tailor solutions built around the strength of your qualifications.

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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  • Important Information

      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.