Residual Stock Loans: Financing Guide
Residual stock financing is a loan designed for property developers who have completed a project but have unsold units remaining. These loans allow developers to release equity tied up in these unsold properties, providing them with liquidity to reinvest in new projects or cover ongoing expenses.
Property development finance, including residual stock loans, is essential for developers needing cash flow while waiting for market conditions to improve or to avoid forced sales at potentially lower prices.
With various options available in the market, developers can explore flexible financing solutions tailored to their needs.
How Does a Residual Stock Financing Loan Work?
In many cases, residual stock loans may be structured based on the value of unsold units, often functioning as a refinancing option by using part of the development as collateral.
Often times, developers can apply for this loan by presenting the details of their project, including the number of unsold units and their market value.
A residual stock loan can allow developers to hold onto the remaining residual stock in their development until market conditions improve. The loan amount can be influenced by the loan-to-value ratio, depending on the lender’s criteria. Once approved, developers typically receive the funds to manage as needed, with repayment terms varying based on lender policies.
Difference from Traditional Property Development Loans
Unlike a traditional property development loan, which is used during the construction phase, residual stock loans are post-construction. They provide a financial cushion after project completion, focusing on unsold inventory rather than ongoing construction costs. This distinction allows for different terms, rates, and flexibility tailored to the post-completion phase of development.
Key Features of Residual Stock Loans
Loan Terms
Residual stock loans typically have terms ranging from 6 to 18 months. This period provides developers with the necessary time to sell their remaining units without rushing the process.
Loan-to-Value Ratios
Loan-to-value ratios for residual stock loans can vary depending on the lender’s policies and the market value of the unsold units. This ratio determines the maximum loan amount relative to the appraised value of the properties.
Lower Interest Rates
These loans usually offer lower interest rates compared to construction loans, reflecting the reduced risk associated with completed projects as opposed to those still under development.
Flexible Options
Developers can opt for individual loans for each unsold unit or a single facility covering all residual stock, depending on their specific needs and the lender’s offerings. This flexibility allows for tailored financial solutions that match each project’s unique circumstances.
Who Is a Residual Stock Loan For?
Residual stock loans are ideal for property developers who have completed their projects but have not yet sold all the units. Developers might leverage funds from residual stock loans to invest in new development sites or manage their current financial position effectively. These loans cater to those needing liquidity to maintain operations, invest in new opportunities, or wait for a more favourable market to sell their remaining stock.
Benefits for Developers
Residual stock loans give developers the possible flexibility to hold onto unsold units until market conditions improve. Some benefits include:
Flexibility to Hold Unsold Units – Avoiding forced sales in unfavourable market conditions.
Maximise Return on Investment – Provides quick and reliable access to construction finance options to maximise their return on investment.
Availability of Funds for Reinvestment – Access to immediate funds, which can be reinvested into new projects
Advantages Over High-Interest Construction Loans – Lower interest rates compared to high-interest construction loans
Need a Residual Stock Loan?
Maxiron Capital is a trusted commercial lender that can assist in residual stock finance loans. Our services are designed for developers needing flexible and efficient financing solutions for their unsold units. We provide expert assistance throughout the loan process, ensuring you receive the best terms and conditions suited to your needs.
Our residual stock loan amounts can range significantly from $250,000 up to $12 million. Loan-to-value ratios (LVR) and terms may vary, often extending up to 24 months, depending on certain situations.
This option is available for business purposes and sometimes, even to companies on existing 1st & 2nd mortgages. Repayments can be done monthly, as a lump sum, or a combination depending on the agreement.
Other possible benefits of Maxiron Capital’s Residual Stock Loan include:
- No postcode/location Restrictions
- No credit score requirement
- No income requirement
- No cap on the age
- No citizen/PR requirement
- All property types considered
Again, these qualifications may vary depending on the specific situation and financial standing of the client.
At Maxiron Capital, we understand the challenges that developers face in managing unsold inventory. Our commitment to fast approvals, flexible funding, and personalised service makes us the ideal partner for your residual stock financing needs.
Our strong track record of collaboration with brokers and referrers nationwide ensures you receive comprehensive support.
To explore how Maxiron Capital can assist with your residual stock financing needs, contact us today.
Call: 1300 944 966
Email: [email protected]
Our team of experts is ready to provide detailed information and guide you through the application process.
FAQs
A residual stock loan is a type of financing that allows property developers to release equity from unsold units in a completed project, providing liquidity for reinvestment or operational needs.
This loan is ideal for property developers with completed projects who need to unlock the value of their unsold units without having to sell them immediately.
Residual stock loans are generally short-term.
A developer may need a residual stock loan after completing a project but before all units are sold, particularly if they require funds to maintain cash flow or invest in new projects.
