Debenture

A debenture is a legal document filed at Companies House that gives a lender a charge over some or all of a company's assets. It provides security for a loan or credit facility by creating a legal claim on specified assets if the company defaults on its obligations.

There are two main types of charge within a debenture: a fixed charge attaches to specific assets (such as property or equipment) and prevents the company from selling or disposing of those assets without the lender's consent. A floating charge attaches to a class of assets (such as stock, debtors, or cash) that fluctuates as the business trades. A floating charge can 'crystallise' into a fixed charge in the event of default.

Invoice finance providers typically take a fixed and floating charge debenture over all assets, with a specific fixed charge over the sales ledger. This is a key difference from an overdraft, which may not require a debenture. When comparing finance options, it is important to understand what security a lender requires and how that interacts with other existing charges.

Example

A bank lends a business £200,000 and registers a debenture at Companies House giving it a fixed charge over the company's freehold property and a floating charge over all other assets.

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