Security

In plain terms

Security (sometimes called collateral) is what gives a lender a fallback if a loan goes unpaid. It's the legal right to claim a specific asset — or a class of assets — and sell it to recover the debt. Granting security is what makes a loan a secured loan.

Security takes several forms. A fixed charge attaches to a specific identifiable asset, like a particular property or machine. A floating charge hovers over a changing pool of assets such as stock or debtors. A debenture bundles charges into a single document covering the company's assets broadly. Each gives the lender a different reach if things go wrong.

Why it matters to your business

Security is one of the biggest levers on how much you can borrow and at what price. The more an asset reduces a lender's risk, the more willing they are to lend larger amounts on better terms. But every charge you grant uses up part of your asset base — once an asset is pledged to one lender, it's harder to use it to raise finance elsewhere.

It also affects who gets paid first if a company fails. A lender with a fixed charge typically ranks ahead of unsecured creditors over that specific asset. That's why directors should track exactly what security has been granted, and to whom. Charges over a company are registered at Companies House, so they're publicly visible — and they shape your borrowing capacity for years. Where you can fund a need without granting security, you keep your assets free and your options open.

Common types of security

• Fixed charge — over a named asset, e.g. a property or vehicle; you can't sell it without the lender's consent.
• Floating charge — over a shifting set of assets like stock or receivables, which can crystallise into a fixed charge on default.
• Debenture — a single instrument combining fixed and floating charges across the company's assets.
• Personal guarantee — not security over an asset, but a personal promise from a director to cover the debt.
• Specific asset pledges — such as a charge over a single piece of equipment in asset finance.

Security and Credicorp

Credicorp lends short-term working capital to UK limited companies on terms designed to keep things simple. Crucially, it lends to the company and takes no personal guarantee from the director — so your home and personal assets stay outside the arrangement entirely.

For directors, the practical takeaway is to know what you're granting before you sign. Security is a powerful way to unlock larger or cheaper finance, but it ties up assets and ranks creditors. Reading the security clauses in any loan offer carefully is time well spent.