What is a debenture, and why do lenders ask for one?
If you borrow through a limited company, a lender may take a "debenture". Here is what that means in plain English, and the pros and cons.
Written by Matt Vincent DipFA, CeMAP, CeRER, BSc · Published 25 June 2026 · Version 1.0 · 5 min readA debenture is a legal agreement that gives a lender security over a company's assets, not just the property being mortgaged, but potentially other things the company owns too, such as equipment, stock, and money owed to it. It's registered at Companies House so other lenders can see it.
Think of the mortgage as security over the building, and the debenture as a wider safety net over the company itself.
The two types of charge when using a debenture
- Fixed charge, over specific, identifiable assets (like the property or named machinery). The company can't sell or re-mortgage those without the lender's say-so.
- Floating charge, over assets that change day to day (like stock or cash). The company carries on using them normally, but if things go wrong the charge "crystallises" and fixes onto whatever is there at that moment.
Why lenders ask for them
When the borrower is a company, a debenture gives the lender stronger recourse if the loan isn't repaid, including, if you default on your payments, the ability to appoint an administrator or receiver to recover the debt. It's a common and normal requirement for company commercial borrowing, especially on larger or trading-business loans.
Pros
- Can unlock lending, better rates or larger loans
- A standard, well-understood arrangement
- The company keeps trading and using its assets as normal day to day
Cons
- Ties up company assets as security
- Can limit your ability to raise other finance against the company
- In a default the lender gains significant control
- You may need to clear it before selling the business or its assets
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This guide was published on 25 June 2026 (version 1.0) and reflects our understanding at that time. It is general information about commercial mortgages, not financial advice or a recommendation. Lending criteria, interest rates and tax rules change over time, so please confirm current details with a qualified advisor before acting. Reference: PL-CM-DEBENTURE-v10.