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At Gable Business Finance, we specialise in assisting UK limited companies in securing commercial loans and asset finance. Whether you are looking to expand operations, purchase essential equipment, or enhance working capital, we provide tailored funding solutions to meet your business requirements. Our expertise helps you understand the implications of borrowing, including the need to provide security for loans via charges over company assets.
When your company seeks financing, lenders may request the ability to register a charge over an asset or group of assets. This means that if the company fails to meet its repayment obligations, the lender has legal rights to seize or claim the asset to recover the outstanding debt. Understanding how fixed and floating charges work is essential to making informed financial decisions.
Commercial loans and asset finance agreements often involve a debenture, a formal legal instrument granting security to the lender. Debentures typically include both fixed and floating charges to provide comprehensive coverage over business assets.
A fixed charge is a type of security over a specific, identifiable asset that the business is not expected to sell or replace during normal operations.
A floating charge applies to a pool or class of assets that naturally fluctuate as part of normal business operations.
A debenture is a formal legal document combining both fixed and floating charges. It ensures lenders have comprehensive security over your company’s assets, covering both durable, long-term assets and circulating working capital.
Borrowing via commercial loans or asset finance can help companies:
Using secured borrowing allows businesses to access larger loans and often at lower interest rates, since lenders have security through fixed or floating charges.
Understanding how these charges operate can help directors plan borrowing and safeguard assets. Here’s a deeper look:
Lenders benefit from fixed charges because they secure a specific asset. The borrower cannot sell or remove the asset without lender consent, giving the lender confidence that the asset value will be available in case of default. Fixed charges are often registered at Companies House to formalise the lender’s claim.
Floating charges provide flexibility to both the business and the lender. They allow companies to use assets like stock and receivables for normal trading. However, if the borrower defaults or becomes insolvent, the floating charge crystallises and converts into a fixed charge over the available assets at that time. This ensures lenders retain security even over dynamic assets.
Debenture-backed loans are common in commercial lending, particularly for larger businesses or when multiple asset types are involved. Here’s how these agreements typically work:
Debentures offer lenders comprehensive security, often combining fixed security over major assets and floating charges over working capital. This approach allows businesses to continue normal trading while providing assurance to the lender.
A UK-based manufacturer required £500,000 to purchase new production machinery. Gable Business Finance arranged an asset finance agreement using a debenture with a fixed charge on the new machinery and a floating charge over existing stock. The company could continue operating normally while the lender had security in place. The loan was repaid over three years with minimal disruption.
A retail business wanted to acquire a new warehouse. We organised a commercial loan secured via a fixed charge over the property and a floating charge over the company’s inventory. This structure allowed the business to expand operations while preserving working capital. The lender had priority claims in the event of default.
A logistics company sought funding to buy a fleet of delivery vans. Using asset finance with a fixed charge on the vehicles and a floating charge over trade receivables, the company maintained cash flow for operational costs. The loan terms allowed flexible repayment aligned with the company’s revenue cycle.
A small service company faced late client payments. Gable Business Finance facilitated invoice discounting using a floating charge over receivables. This allowed the company to access cash for payroll and day-to-day expenses while continuing business as usual. The lender’s security was the outstanding invoices, which crystallised into a fixed charge only if the company defaulted.
Before entering into debenture-backed lending agreements, businesses should consider:
We guide UK companies through the entire process of securing commercial loans and asset finance:
Our expertise ensures businesses secure funding while understanding the legal implications of asset-backed borrowing.
A fixed charge is a legal security over a specific asset. The asset cannot be sold or disposed of without the lender’s consent. Examples include property, machinery, or high-value vehicles.
A floating charge applies to a class of assets that fluctuates during business operations, such as stock or cash. It allows the business to trade normally. If the company defaults, the floating charge crystallises into a fixed charge over the assets at that moment.
A debenture is a legal document combining fixed and floating charges to secure a loan. It provides the lender with broad security over specific and circulating assets of the company.
Debentures protect lenders by ensuring they have priority claims over assets in the event of default or insolvency. They allow the lender to offer larger loans at more favourable rates while giving the business operational flexibility.
Yes. Floating charges allow businesses to buy, sell, and replace assets like stock or receivables during normal operations. Only if a default occurs does the floating charge crystallise.
In insolvency, preferential creditors (like employees) are paid first. Fixed charge holders are next, followed by floating charge holders. This ranking impacts the order in which lenders recover funds.
Debentures are often used by mid-sized and larger SMEs when borrowing significant sums or arranging asset finance, but they can also be tailored for smaller businesses depending on lender requirements.
At Gable Business Finance, we specialise in helping UK limited companies access commercial loans and asset finance with clear guidance on fixed and floating charges, debentures, and lender requirements. Our service ensures you secure the funding your business needs while maintaining operational flexibility and protecting your interests.