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Fixed charge vs floating charge:
what is the difference?
When a lender takes security over a business, it uses one of two mechanisms: a fixed charge over a specific asset, or a floating charge over the general asset pool. This guide explains both — and why Credicorp products involve neither. No debenture. No charge. No personal guarantee.
What each type of charge means
Fixed charge
Security over a specific identified asset — land, property, specialist equipment. The borrower cannot sell or dispose of that asset without the lender’s consent. On default, the lender can seize and sell the specific asset. A mortgage is a common form.
Examples: property mortgage, charge over a specific machine, charge over intellectual property.
Floating charge
Security over a class of assets that changes over time — stock, debtors, cash, receivables. It “floats” over the pool. On default, it “crystallises” — it fixes onto whatever assets exist at that moment, and a receiver can take control.
Covered by: a debenture (all-assets security document registered at Companies House).
Fixed charge, floating charge and personal guarantee compared
| Type | What it covers | Registered? | Credicorp takes it? |
|---|---|---|---|
| Fixed charge | A specific identified asset (property, equipment) | Yes, at Companies House | No |
| Floating charge | General pool of company assets (stock, debtors, cash) | Yes, via debenture at Companies House | No |
| Personal guarantee | Director personally — all personal assets may be at risk | No (separate contract) | No |
| Credicorp products | No security at all — fully unsecured | N/A | Unsecured |
Five things to check before signing any secured lending agreement
- Look for “fixed charge”, “floating charge” or “debenture”. These words in the agreement mean the lender is taking security over company assets. Understand exactly which assets.
- Check for a personal guarantee. This is a separate document. If present, the director is accepting personal liability. Review it with an independent solicitor.
- Check whether security will be registered at Companies House. A debenture must be registered within 21 days. This creates a public record and may affect future creditors’ priorities.
- Understand priority ranking. If the company has existing charges, a new lender may rank below them in an insolvency. Check what other charges are already registered on the company’s record before taking on new secured lending.
- Consider whether unsecured products are available. For short-term working capital needs, unsecured products (like Credicorp’s) do not involve any debenture, charge or personal guarantee. If the need is short-term, the security commitment of secured lending may not be necessary.
Fixed and floating charge questions
What is a fixed charge?
A fixed charge is a form of security a lender takes over a specific identified asset of the borrower — typically land, property, or specific equipment. The borrower cannot sell or dispose of that asset without the lender's consent. If the borrower defaults, the lender has the right to seize and sell that specific asset to recover the debt. A mortgage over a property is one common form of fixed charge.
What is a floating charge?
A floating charge is security over a class of assets that changes over time — typically the general assets of a business: stock, debtors, receivables, cash. Because these assets change day to day as the business trades, the charge "floats" over the pool rather than attaching to a specific item. If the borrower defaults, the floating charge crystallises — it fixes onto the assets at that moment and the lender can appoint a receiver to take control of them.
What is a debenture and does Credicorp take one?
A debenture is a formal document by which a company grants a lender security — often both a fixed charge over specific assets and a floating charge over the general asset pool. It is registered at Companies House. Debentures are common in larger, secured business lending — asset finance, property development finance, and some term loans. Credicorp does not take a debenture. All Credicorp products are unsecured. There is no charge of any kind over the company's assets.
Is a personal guarantee the same as a charge?
No. A personal guarantee is a separate commitment — a promise by an individual (usually a director) to repay the company's debt personally if the company cannot. A charge secures against assets; a personal guarantee secures against a person. Many secured lenders take both. Credicorp takes neither: no charge over any assets, no personal guarantee from any director.
Why does Credicorp not take a fixed or floating charge?
Credicorp's short-term products are designed to be quick, clean, and free of security obligations. Taking a debenture requires legal documentation, registration at Companies House, and typically solicitors on both sides — adding time and cost that is not appropriate for short-term working capital finance. The lending decision is based on the company's cash flow and ability to repay from trading income, not on the security available. A company director does not put any asset on the line — business or personal.
No charge. No debenture. No personal guarantee.
Credicorp short-term business finance is fully unsecured. The company borrows; no asset is put on the line.