Debenture

Definition

In UK business lending, a debenture is a written agreement that grants a lender security over a company's assets as backing for a loan. It creates a registered charge — typically a combination of a fixed charge over specific assets (like property or machinery) and a floating charge over changing assets (like stock and receivables). The debenture is registered at Companies House and ranks the lender ahead of unsecured creditors if the company fails.

In plain terms

A debenture is the document that turns a loan into a secured one against the whole business. Where collateral pledges a single named asset, a debenture can capture the company's assets broadly — both the fixed things it owns and the ever-changing pool of stock and money owed to it.

The fixed charge part locks down specific assets you can't sell without the lender's consent. The floating charge part hovers over assets that come and go in normal trading, and crystallises into a fixed charge if you default. It's recorded publicly at Companies House, so anyone checking your company can see a lender holds security over it.

Why it matters to your business

Granting a debenture is a significant step. It gives the lender wide-ranging security and priority over other creditors, can limit your freedom to sell or charge assets elsewhere, and appears on the public register — which other lenders will see and factor into future decisions.

Not all business finance needs one. Short-term, unsecured facilities can fund working capital without a debenture or a personal guarantee. If a lender does ask for a debenture, read exactly what assets it captures and how the floating charge behaves. The convenience of borrowing should be weighed against handing over security across your whole company.

Example

A manufacturer borrows £500,000 from a bank to expand. The bank takes a debenture: a fixed charge over the factory and key machinery, and a floating charge over stock, raw materials and trade debtors. The company can keep buying and selling stock as normal under the floating charge. But it can't sell the factory without consent, and if it later defaults, the floating charge crystallises — freezing the remaining stock and debtors as security. Anyone searching Companies House can see the bank's registered charge ranks ahead of unsecured suppliers.