What Is A Debenture In Business Lending?
A debenture is a legal document that creates a lender’s charge over a company’s assets as security for a debt.
It is registered at Companies House, which makes it publicly visible — so any other lender looking at the company will see it. That visibility matters, because it directly affects what further borrowing is available.
Fixed And Floating Charges
Debentures typically contain two kinds of charge:
- A fixed charge over specific identifiable assets — property, plant, particular machinery. The company cannot dispose of those assets without the lender’s consent
- A floating charge over assets that change in the ordinary course of trade — stock, debtors, cash. The company trades freely with them until the charge crystallises, usually on default or insolvency, at which point it fixes onto whatever assets exist at that moment
A debenture covering substantially all of a company’s assets is often called an “all assets” debenture, and lenders may refer to holding a first-ranking charge.
Why It Matters When You Borrow Again
This is the practical point most business owners meet later rather than sooner. If one lender holds a debenture over your debtors, an invoice finance provider cannot take security over the same book unless the existing lender agrees to release or rank behind it.
In practice that means:
- A deed of priority may be needed, setting out which lender ranks where
- Or a waiver, where the existing lender carves specific assets out of its charge
- Or the new facility simply is not available while the debenture stands
Negotiating these can add weeks to a transaction, so it is worth knowing what charges are registered against your company before you start looking for additional funding. You can check free of charge on the Companies House register.
A debenture is company security and is separate from a personal guarantee, which is a personal obligation. Many facilities take both.
Read more about business finance options, or talk to us about existing charges on your company.
General guidance only, not legal advice.
« Back to Glossary Index