Residual stock, or take-out loans are designed for property developers who have completed a project and wish to retain some of the remaining units or dwellings, rather than sell them to settle the balance of their property development loan. Before you are approved for a development loan, the lender may stipulate the level of sales you need to achieve before advancing funding. When the development is finished, you are required to pay back the facility. This is achieved either by refinancing to another lender or by selling some of the residual stock. However, if market conditions aren’t right, residual stock can be difficult to sell, particularly because lenders can be reluctant to provide finance to buyers in developments with a high vacancy rate. This is where residual stock financing can help with a development loan refinanced as a short-term loan. Residual stock can then be held until a more favourable time. A lender will usually set up separate loans for each unit or dwelling, rather than a large single facility covering all residual stock. As each unit is sold, that particular facility is settled and closed. For commercial projects – such as the redevelopment of retail shop units, a supermarket, new office suite or large block of units – a lender may also consider property development income and let you refinance more units in your development.