Loan Against Rent Receivables

Investing in a commercial property can prove to be advantageous in innumerable ways. You can always offer it on lease and earn a decent rental income every month. Moreover, you can monetize these rental receipts to avail a significant line of credit. Lease rental discounting is a term Loan you avail by pledging rental receipts as collateral.

As you are providing collateral for receiving loan, it becomes a secured line of credit. You can easily repay the loan amount in Equated Monthly Instalments (EMIs) as per your affordability. This makes the financing option simple and flexible.

There is no end-use restriction. Whether you plan to upscale your production or require financing to set up a new retail store or wish to pay off existing debt, you can do it all by applying for Lease Rental Discounting.

Following are the various types of properties you can pledge as collateral and secure the required loan amount:

• Agreement between three parties

  Note, that Lease Rental Discounting is a loan offering against the expected rental cash flow and not the property. Hence, it’s an agreement between three parties – you, the tenant, and the bank. On signing the agreement, the tenant agrees to make rental payments directly to the bank for loan repayment.

• Tenant’s financial standing

  Since the rental payments are entirely dependent on the tenant’s financial standing, the bank considers it for loan approval. If the tenant has a solid financial standing, they will be able to make rental payments without defaults. This facilitates hassle-free loan approval and a significant offering. If the tenant has poor financial standing, there is a high possibility they will struggle to make timely rental payments. This could hinder your loan approval.

• Lease term

  Lease term is the time period for which the property lease is in force. The minimum and maximum lease terms are different for every property type and state. Banks consider the lease term for loan approval, as it indicates the continuing rental cash flow. Based on the lease term banks offer a suitable loan amount for an appropriate repayment tenure. Generally, most banks look for a longer lease term for loan approval as it translates to a stable repayment capacity for a longer period.