A debenture is a legal agreement that secures a lender’s interest in a company’s assets. It is commonly used when a business takes on medium or long-term finance and wants to protect the lender’s position without giving up equity.
This structure is only available to limited companies and LLPs. It sets out the terms of a loan and places a legal charge, fixed or floating, on business assets such as property, equipment, or receivables. The debenture is registered at Companies House, making it public and giving the lender priority over unsecured creditors if the company becomes insolvent.
For lenders, this reduces risk and can make it easier to offer competitive terms. For businesses, it provides access to structured finance without diluting ownership. However, once a debenture is in place, it can affect future borrowing. New lenders must consider the existing charge, and some may require consent or additional security. This can limit flexibility, so timing and structure are key.
Debentures are often used in asset-based lending or when businesses consolidate existing debt. They can also be part of a wider funding arrangement, particularly when a lender needs assurance that the company has sufficient assets to support repayment.
Time Finance plc (LON:TIME) is an AIM-listed business specialising in the provision or arrangement of funding solutions to UK businesses seeking to access the finance they need to realise their growth plans. Time Finance can fund businesses or arrange funding with their trusted partners through Asset Finance, Invoice Finance, Business Loans, Vehicle Finance or Asset Based Lending.
