Residual Stock Finance 

In an era of tightened credit, developers have had a harder time obtaining financing, but residual stock loans can be used in a variety of situations to acquire money.

In a residual stock refinancing, the developer may refinance completed and unsold stock in a development over a limited period of time, which gives the developer time either to sell the stock or to use the equity for the next project.

The property developer can reduce some of the lumpiness in their cash flow by taking out a residual stock facility with a revolving line of credit, where they can swap securities in and out over time.

Need to Know about Residual Stock Finance:

• Depending on where the project is located, the LVR could vary
• The LVR is determined by the number of units/lots unsold to the number of units sold in the development
• Each unit is either analyzed independently or as an inline value (all together into one).
• Time for stock sales to increase
• Recapitalize in order to begin another project
• Construction facilities are more expensive
• Paying off existing lender (Construction) is necessary