Residual Stock Finance

A development project reaching completion with unsold stock is a position many developers face, and it creates a specific financing problem: the construction loan is coming due, but the sales proceeds have not yet arrived. Selling at a discount to clear the loan is one option, but holding the stock and achieving target prices is often the better outcome. Residual stock finance is the facility that makes holding possible. Settled Funding Group arranges residual stock finance through non-bank and specialist lenders, and for unique scenarios we can introduce you to private finance options.

Who This Is For

• •Developers who have completed a project but have unsold stock remaining, with the construction loan approaching its expiry date
• •Those whose construction loan is expiring and sales have not yet completed, where an extension from the existing lender is not available or is on punishing rollover terms
• •Developers who want to hold completed stock and achieve their target sale price rather than accept below-market offers under pressure
• •Investors refinancing off a development loan to a long-term investment facility on completed units they intend to hold as a rental portfolio
• •Those managing cash flow between project completion and settlement of sold dwellings, where unconditional contracts are in place but settlement has not yet occurred
• •Developers who need time to achieve their target sale price without commercial pressure from the construction lender

How Residual Stock Finance Works

Once a development is complete, the residual stock facility replaces the construction loan. The new facility is assessed on the value of the completed unsold dwellings, not the development cost or the original GRV estimate. This is a key distinction: the lender is looking at what the completed stock is worth today as an asset. Joseph Farhat reviews the completed project, the unsold stock position, the sales pipeline, and the existing debt, then identifies lenders on the 90+ panel who have appetite for residual stock facilities at the relevant project size and location.

A real example of how residual stock finance can rescue a completed development: read the Five Dock duplex rescue case study, which shows how a completed development was refinanced using specialist finance to discharge a construction loan that was due, buying time to achieve the right sale price rather than being forced into a distressed sale. The same structure applies to residual stock scenarios across all development types.

What Lenders Assess for Residual Stock Finance

• •Value of completed unsold dwellings: the lender commissions an independent valuation of the unsold stock as completed dwellings, not as development land or work in progress.
• •LVR against unsold stock value: residual stock lenders typically lend up to 65% of the current market value of the unsold completed dwellings. The LVR reflects the illiquidity of holding multiple completed properties.
• •Sales pipeline: exchanged but not yet settled contracts are viewed very positively, as they represent a near-certain exit. Unconditional contracts are the strongest position. Lenders look carefully at the pipeline to assess the exit timeline.
• •Holding costs and exit timeline: the lender assesses whether the borrower can service the residual stock facility for the expected period until the remaining stock is sold, and whether the exit timeline is realistic.
• •Existing construction loan terms: if the construction lender is applying pressure or the rollover rate is punishing, the urgency of transitioning to a residual stock facility is higher, which may affect the available lender options.
• •Development quality and marketability: the condition of the completed dwellings, their location, the price point, and the depth of the target buyer market all influence the lender's confidence in the exit.

The Residual Stock Finance Process: What to Expect

1. 1.Initial review of completed project and unsold stock position: Joseph Farhat reviews the completed development, the number and type of unsold dwellings, the sales pipeline, and the existing construction loan position. This establishes what is achievable and which lenders are appropriate.
2. 2.Application with title details, valuation, sales pipeline, and existing debt: the application is prepared with occupation certificates, title details for the completed lots, a schedule of unconditional and exchanged contracts, existing debt documentation, and the borrower's financial position.
3. 3.Independent valuation of unsold stock: the lender orders an independent valuation of the completed unsold dwellings on a current market basis. The valuation is the foundation of the LVR calculation.
4. 4.Approval and discharge of construction loan: once approved, the residual stock facility is established and the construction loan is discharged. The developer is no longer subject to the construction lender's rollover terms.
5. 5.Progressive reduction as stock is sold: as each unsold dwelling settles, the relevant portion of the residual stock loan is repaid from the sale proceeds. The loan reduces progressively until all stock is sold and the facility is discharged.

Indicative Finance Options

Residual Stock Finance Broker

Residual stock lending is its own niche, and lender appetite is inconsistent. Funders treat unsold completed dwellings very differently depending on the number of units, the discount to valuation, concentration risk, and how quickly you need to release the original development facility. A position one lender will not refinance is funded readily by another. A broker who knows which lenders actively fund residual stock saves you weeks of wasted applications, protects your credit file from unnecessary enquiries, and connects you with non-bank and specialist funders most developers cannot approach directly.

Settled Funding Group represents you, the borrower, not the lender. Joseph Farhat reviews your completed stock, valuation, sales evidence, and refinance or release timeline, then matches the project to the right lender from our 90+ panel and negotiates terms on your behalf. We prepare and manage the submission end to end, from indicative assessment through to your first drawdown. As a broker, we are typically paid by the lender on settlement, so in most cases there is no direct cost to you. If your project is complex, time-critical, or has been declined elsewhere, talk to us early and we will tell you honestly what is achievable.