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LVR up to 70%

Loan term up to 36 months

Commercial and residential properties are eligible

Release equity out of the residual stocks

What is a Residual Stock Finance?

Dealing with unsold properties, referred to as residual stock, is one of the risks a property developer has to face sometimes.

Some property developers decide to keep some of their properties and sell them later when the market is better. This way, they can maximise the return on investment and aren't forced to sell in a hurry.

The good news is, there's a way to handle this issue – it's called residual stock finance.

A residual stock loan is a short-term loan tied to the homes that haven't been sold yet in a development project. This kind of funding eases the burden on the developer, providing them with the time to find buyers who are willing to pay reasonable prices for unsold homes.

Critical information sheet

Our loan guide

Residual Stock Finance

Loan amount

Starts from $100k

Interest rates from

From 10.99% p.a.

Loan term

Up to 36 Months

Pre-approval time

24 – 48 hours

Unconditional approval & settlement time

10-15 Business days

Repayments

Interest Only & Capitalised Interest

Security

Underlying residual stock

What you need to know

Can be used for

To release equity out of the completed projects

To invest into a new project.

Documents required

Valid identification proof

Security Details

Exit Strategy

Others depending upon loan product

*The information provided in critical information sheet is intended as a guide only. Please contact us for more information.

What you should know about Residual Stock Finance

Have questions? Speak to our experts!

1300 253 041 Apply Now

Who is a residual stock loan for?

Residual stock funding caters to property developers who finish a project but still have unsold dwellings. Having unsold dwellings can create a significant financial gap even though they can generate some income by renting out the unsold homes, the profit is considerably less compared to selling them.

Developers may end up with unsold stock due to a market downturn, making their selling prices seem high. Alternatively, they might intentionally hold back some properties to prevent oversupply in the market.

Pros and Cons of Residual Stock Finance

Pros

Financial Relief: Residual stock loans offer a solution for developers facing financial challenges due to unsold stock.

Refinancing Advantage: Developers can transition from a higher-rate construction loan to a lower-rate residual stock loan.

Extended Loan Term: This transition allows for an extended loan term, providing developers with more time and flexibility.

Reduced Pressure: With the extended loan term and lower rates, developers no longer feel compelled to hurriedly sell unsold stock, avoiding the risk of accepting lower prices.

Cons

Possibility of Over-Leveraging: Relying heavily on inventory-based loans can lead to over-leveraging, posing financial risks during challenging times.

Impact on Credit Score: Defaulting on payments can negatively affect the business's credit score, making future financing more challenging.

How does a residual stock loan work?

A residual stock loan is a short-term agreement that is tied to stocks/properties that have not been sold yet.

This financial solution usually involves refinancing, transitioning from the original property development finance, which may have a higher interest rate, to the new residual stock finance with a lower rate.

It's important to note that terms can vary significantly among lenders in the world of property development finance. Typically, residual stock finance loans have durations ranging from six to 36 months, with loan-to-value ratios (LVR) falling between 40% and 70%.

What properties are eligible for Residual Stock Finance?

Residual Stock Finance is open to both commercial and residential properties. The loan can be utilised for refinancing an existing development facility loan or for accessing cash.

How much can I borrow?

Typically, it’s only private lenders that offer this type of so-called take-out finance, but we have a couple of non-bank lenders on our panel that can help.

  • Borrow up to 70% of the value of each unit.
  • Max loan amount: Loans over $5 million considered on a case-by-case basis.
  • Max loan term: 1-2 years on an interest only term.
  • Low doc options are available.
  • Bad credit loans are not available.
  • Lenders prefer developments in metro locations.

Overall, It's important to note that the financing for a larger number of units may result in a lower Loan to Value Ratio (LVR) qualification. This is because funding numerous units presents a higher exposure, which is a risk that many lenders are hesitant to undertake.

How do I apply for a Residual Stock Finance?

1. Submit Application

First step is to simply fill out the application form with the required information and loan request.

2. Get Indicative Quote

Once the application is received, our lending specialist would get an indicative quote within 24-48 hours.

3. Letter of Offer (LOO)

Once we receive the mandate to proceed basis indicative quote, we get a formal letter of offer from the lender.

4. Valuation and Legal Docs

On receipt of signed LOO, the lender would initiate valuation and get loan docs prepared.

5. Disbursement

Once we receive the mandate to proceed basis indicative quote, we get a formal letter of offer from the lender.

why-choose3

Why should you choose Broc Finance?

Tailor made options

Being a small business owner, many of our clients are not sure of right loan product for their businesses. Our lending specialists understand their needs and recommend tailor made options.

Personal Consultation

Unlike business loan marketplace websites which use AI based algorithms to match your requirements, we provide obligation free personal consultation as every business is different and an AI based algorithm may not provide them the optimum solution.

personal-consultation

Competitive Pricing

We endeavour to achieve the optimum business loan solution for our clients at the most competitive pricing possible.

Clear communication

We understand the essence of time so don’t believe in wasting our customers time by giving false hopes. Transparent and clear communication is in our DNA.

Real results with real people.

65+ customer reviews

5.0

John Christian

John Christian

Broc Finance were a pleasure to work with. Saroj took the time to understand the purpose for the facility and my business. In doing so, he secured exactly what I wanted, quickly and at a very competitive rate. I’d recommend Broc Finance to anyone looking for a finance facility who wants to work with a broker who can provide that personal experience that the Big-4’s just don’t offer. Great experience!! I look forward to working with Broc Finance in the future.
Manpreet Kaur

Manpreet Kaur

Our sincere thanks to Saroj ji & his team for their invaluable assistance in securing the loan. We are extremely greatful for his exceptional service & support throughout the process. Highly recommend!
Amish Desai

Amish Desai

A true professional with in depth knowledge of products and processes; Real time delivery of service, with a customer centric view, simply superb Saroj!
Harry Gill

Harry Gill

It was Great to work with Saroj. He was very accomodating and helpful . The process of the loan was very simple and easy. Saroj kept me updated at every step. Highly Recommend Saroj . Harry
Matthew

Matthew

Broc Finance were awesome…really responsive and solutions focussed. We especially appreciated having a broker who was an advocate for our interests when engaging with lenders.
Niteesha Nagowah

Niteesha Nagowah

We had an incredible experience working with Saroj from Broc Finance. He is incredibly knowledgeable, responsive, and guided us through the purchase of our company vehicle with expertise. The attention to detail and commitment to finding the best possible options truly set him apart. Highly recommend his services for anyone navigating the complexities of obtaining a finance. Thank you again for outstanding assistance.
Ibrahim Alpay

Ibrahim Alpay

Saroj and his team is amazing have been using him for business funding for over a year he has found surprising solutions when others couldn’t make it happen very skill full with negotiating high loan amounts that I would never expect at wonderful terms and rates look no further I recommend broc finance for your business lending purposes look no further and don’t think twice much appreciated won’t go to any other broker at all many thanks to his team !!!!!!
Greg Canal

Greg Canal

Saroj Shah (Sas) was very easy to deal with and the outcome was just what we wanted and super fast. Thank you

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Frequently asked questions

Businesses in retail, manufacturing, distribution, and wholesale sectors often benefit from residual stock finance. Any company with significant amounts of unsold inventory can potentially use this financing method to improve cash flow and liquidity.

How is the inventory valued in residual stock finance?

[Answer]

Lenders typically use a combination of methods to value inventory, including:

  • Market Value: Current selling price of the inventory.
  • Cost Value: Original cost of acquiring the inventory.
  • Liquidation Value: Expected value if the inventory were to be sold quickly, often at a discount

The time frame varies by lender but can range from a few days to a couple of weeks, depending on the complexity of the inventory assessment and the company's financial situation.

Yes, residual stock finance can often be used in conjunction with other financing methods such as traditional loans, lines of credit, and invoice financing to provide a comprehensive solution to a company's cash flow needs.