Residual Stock Loan

Chasing your business dreams can be challenging, but we’re here to help with our expertise in residual stock loans in Australia. We’re dedicated to turning your business goals into tangible achievements. We will help you secure a residual stock loan at low rates and flexible terms. We lend to businesses with bad credit histories.

Residual Stock Loan

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Bad Credit Development Loans

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Serving Since 2001

Lending All Across Australia

Capitalise on your assets, transform inventory into opportunities with Residual Stock Loans.

What is a Residual Stock Loan?

Residual stock loans provide a solution to property developers seeking to retain a portion of the remaining units or dwellings post-completion of their projects instead of selling them off to settle the outstanding balance of their property development loans. Essentially, these loans come into play when developers need additional funds to repay construction debt and unlock equity for subsequent development ventures.

How Residual Stock Loans Work in Australia

Residual stock loans aid property developers, offering a way to retain some unsold units or dwellings post-project completion. Instead of selling these to pay the remaining balance of their property development loans, developers can leverage residual stock loans. These loans step in when developers require more funding to clear construction debt and unlock equity for the next wave of development projects.

Residual stock loans function differently from regular loans. Rather than providing a single loan facility to cover all unsold stock, lenders create individual loan facilities for each unsold unit or dwelling. The corresponding loan facility is paid back and closed as each property is sold. This approach ensures a cycle of payment that promotes financial feasibility for both lenders and borrowers.

The Pathway to Applying for Residual Stock Loans

There are several eligibility requirements for those intending to apply for residual stock loans:

  • Income Verification: Your earnings play a pivotal role in determining the success of your loan application. Submitting tax records for the previous two years and the Notice of Assessment (NOA) is imperative.
  • Loan Security: Some lenders might permit an unsecured loan if you can provide bank statements from your business, previous tax returns, an accountant’s certification of your declared income, and any financial records from the relevant period.
  • Loan-to-Value Ratio (LVR): Based on the documentation provided, you could secure a loan ranging from 60% to 80% of the individual dwelling values. Some lenders may offer higher rates for homes that are already sold.
  • Credit History: A clean credit history is crucial to your loan application’s outcome.
  • Marketability of Homes: Lenders prefer properties that can be swiftly sold due to the short-term nature of these loans.
  • Development Location: The location of your development can significantly influence your loan outcome. Developments in metropolitan areas tend to sell more quickly, thus being preferred by banks.
  • Market Conditions: Banks will consider the proportion of your stock already sold and other prevailing market conditions. However, private lenders exhibit more flexibility and often have lower requirements for these types of loans, albeit at a slightly higher cost.

Should you encounter difficulties proving your income through tax returns, specialist lenders might consider alternative proofs such as a letter from your accountant confirming your earnings, bank statements revealing high business turnover, tax returns older than 24 months, and interim financial statements.

Distinguishing between Commercial and Residential Development

While a few units on a single title can typically be financed with a residential loan, developers must showcase a source of income not derived from the property development to qualify for a residual stock loan with residential terms. However, commercial ventures that involve redevelopment or reconstruction, or new office suite brands, can be accommodated with a commercial loan, with the lender considering development income.

The Upside and Downside of Residual Stock Financing

The Advantages

Residual stock financing comes with distinct benefits:

  • Financial Flexibility: These loans offer financial flexibility to developers. They can retain their unsold stock until market conditions become more favourable, potentially optimising the return on their investment.
  • Lower Interest Rates: Developers can refinance from a higher-interest building loan into a lower-interest residual stock loan. This can extend the loan’s term at a reduced cost, alleviating financial pressure.

The Disadvantages

While residual stock loans can provide financial relief, they also have their limitations:

  • Repayment Timeframe: These loans usually have a restricted repayment timeframe. Developers must ensure they can meet this deadline to avoid further financial complications.
  • Pre and Post-Sold Conditions: Residual stock loans often come with conditions related to the state of the property before and after it’s sold. These conditions can sometimes create challenges for developers.

Ready to proceed?

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Success Stories: Case Studies

We’re happy to have helped many clients all over Australia with our residual stock loan services. From big cities like Melbourne, Sydney, and Perth to other places such as Adelaide and Canberra, our clients have found great benefits and success through the services we provide.

Case Study: Residual Stock Loan in Melbourne

A Melbourne-based property developer was left with several premium unsold units in a newly completed residential complex. Aware of the city’s fluctuating real estate market, the developer turned to Basic Finance Loans for a residual stock loan. This strategic decision allowed the developer to retain the units until market conditions became more favourable. Upon selling the units at peak market prices, each loan facility was comfortably repaid, maximising the developer’s returns.

Case Study: Residual Stock Finance in Sydney

Having finished a commercial property project, a developer in Sydney faced the challenge of unsold office suites. They recognised the potential for higher rental income and approached us for a residual stock finance. This facilitated the retention and leasing of the office suites, generating steady rental income. The payment not only serviced the loan repayments but also delivered positive cash flow, affirming the value of residual stock loans in the commercial sector.

Key Takeaways: Is it worth borrowing?

A residual stock loan depends on your unique circumstances and business objectives. At Basic Finance Loans, we work with various investors and lenders, from non-bank private lenders to conventional banks. We are dedicated to understanding our client’s needs and providing solutions that fit their requirements, be it quick bridging finance, short-term loans, long-term loans, regular home loans, development loans, caveat loans, Asset finance, Property Development Loans, secured business loans, unsecured business loans, private lender loans, or commercial loans. Our services extend across Melbourne, Victoria, Adelaide, Sydney, and Perth, covering all corners of Australia.

Frequently Asked Questions (FAQs)

How much can I borrow?

Our non-bank lenders can assist you in borrowing up to 80 per cent of the unit value, and with a guarantor, up to 100 per cent of the unit value. However, the more units you wish to purchase, the lower your Loan-to-Value Ratio (LVR) will be.

What is the minimum deposit required?

The minimum deposit requirement varies amongst lenders and their assessment criteria. For more details, contact us.

What is the interest rate?

The specialist lender typically determines interest rates that can be negotiated. Don’t hesitate to get in touch with us for more details.

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