Debentures and charges explained

What a debenture is

A debenture is the legal document a company grants to a lender to secure a debt against the company's assets. It does not name a sum so much as create a framework of security: it sets out the lender's rights over the business's property if the company fails to pay. Debentures are standard on many forms of secured and asset-based business lending.

The security itself takes the form of one or more charges — legal claims over assets. A debenture typically bundles together a fixed charge over specific items and a floating charge over the rest of the business, giving the lender broad cover. Understanding the two charge types is the key to understanding what a debenture actually does.

Fixed charges versus floating charges

A fixed charge attaches to a specific, identifiable asset — commonly property, but also plant or machinery. While the charge stands, the company cannot sell or dispose of that asset without the lender's consent. It is the stronger form of security, and in an insolvency the fixed-charge holder ranks near the front of the queue for the proceeds of that asset.

A floating charge hovers over a class of changing assets — stock, debtors, cash — that the company is free to use and turn over in the ordinary course of trade. It only fixes onto specific assets if the company defaults, a moment called crystallisation. Floating charges give flexibility while trading but rank behind fixed charges and certain creditors on insolvency.

Registering a charge at Companies House

When a company grants a charge, it must normally be registered at Companies House within 21 days of creation. Registration puts the security on the public record, so anyone — other lenders, suppliers, buyers — can see the company's assets are encumbered. Miss the deadline and the charge can be void against a liquidator or other creditors, which is why lenders insist it is done promptly.

For a borrower, this means a debenture is visible. Future lenders will see existing charges and factor them into any decision, because they affect what is left to secure new borrowing against. A heavily charged company has less unencumbered asset value to offer, which can limit further secured finance — related to how loan-to-value is assessed.

What it means for the borrower

Granting a debenture is a significant commitment. It pledges company assets, constrains what you can do with them, sits on the public record, and shapes your ability to borrow again. It does not, by itself, put a director's personal assets at risk — that is the role of a separate personal guarantee — but it firmly ties up the company's.

Not all lending requires a debenture. Credicorp lends to limited companies on the strength of their trading and affordability, an approach built for speed rather than the security paperwork attached to charged lending — and with no personal guarantee. You can explore our business loans or register to apply. This guide is educational and not financial advice.