Harper James advises UK businesses on the legal structure of business finance under the laws of England and Wales. Security gives a lender rights over assets or contractual commitments, reducing its exposure if the borrower fails to repay.
Common forms include a fixed charge over a specific asset, such as property, machinery or intellectual property, and a floating charge over changing assets such as stock and book debts. A lender may also require a legal mortgage, personal or corporate guarantee, debenture, or assignment of key contracts and insurance proceeds. The right structure depends on the facility, the business assets and the lender’s risk assessment.
A company taking finance should review the proposed security package before signing the facility agreement. This means checking what assets are charged, whether directors or shareholders give guarantees, which actions require lender consent, and how the lender can enforce its rights. A practical guide to business finance security provides useful background on charges, guarantees and lender protections.
Priority determines which creditor is paid first if several lenders claim the same asset. Existing debentures, retention of title clauses, asset finance arrangements and landlord rights all need review. Most company charges must be registered at Companies House within 21 days of creation. Missing the deadline can affect the charge’s validity against an administrator, liquidator or other creditors.
New finance arrangements also reflect current concerns about fraud and operational resilience. Lenders increasingly test ownership records, payment instructions, beneficial ownership information and the security of digital signing processes. Businesses should use verified contact details, dual approval for changes to bank details and a clear record of who authorised each document.
Start with an asset and liability schedule, then compare it with the lender’s term sheet and draft debenture. Identify restrictions on disposals, further borrowing, dividends and changes in ownership. Confirm that the company owns the proposed collateral, obtain third-party consents where required, complete board approvals and arrange Companies House registration immediately after completion. Directors should also check that the borrowing and security serve the company’s interests and are properly recorded in board minutes.