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LRD — Lease Rental Discounting
A loan where future rental receivables from a commercial property are discounted to provide a lump sum loan upfront, with EMI serviced from ongoing rent.
LRD is used by property owners who have leased out commercial space to creditworthy tenants. The bank discounts the future rent stream and provides a loan upfront. The tenant is instructed to pay rent directly to the bank, which services the EMI.
Key variables: Quality and tenure of the lease, tenant's credit profile, FOIR on net rent, and LTV on property value. Grade A tenants with 3+ year lock-ins command the best rates and maximum loan amounts.
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