What is Lease Rent Discounting (LRD)?
Lease Rental Discounting (LRD) is a term loan offered against rental receipts derived from lease contracts with corporate tenants. The loan is provided to the lesser based on the discounted value of the rentals and the underlying property value.
It is another method to obtain finance from bank or other financial institute or lending institutes. Lease Rent Discount (LRD) consideration is between the borrower who owns the premises, the tenant who has rented the said premises or taken on lease and the bank or financial institute or Corporate. The rent is considered as fixed income over a stipulated time i.e. Lease or rent period or tenure. The agreement is between the borrower and lender and the major term of repayment is the rent which is directly deposited with the lender and not with the borrower. The Borrower is sanctioned a loan based upon the rent to be collected over the period of lease.
This loan against rental receivables differs from other loan products in two ways:
- The loan agreement is made between the lending institution, the lesser and the lessee.
- The rent is not collected by the lesser, but is credited every month via an escrow account to the lending institution. The lessee/current occupant deposits the rent directly in the escrow account.