2 min read
What secured lending means for a limited company
A secured business loan involves the lender registering a legal charge over an asset — typically commercial property, machinery, or a floating charge over the whole business (a debenture). If the company defaults, the lender has a right to enforce against that asset to recover what is owed. The security reduces the lender's risk, which typically translates into lower borrowing costs and access to larger loan amounts.
Charges over company property are registered at Companies House and will be visible to other creditors and potential lenders. A fixed charge ranks ahead of most other claims in an insolvency scenario, which affects the order of priority for other creditors.
What unsecured lending means — including personal guarantees
An unsecured loan requires no charge over specific assets. The lender relies on the company's trading performance, balance sheet, and cashflow to assess risk. Because the lender has no asset to fall back on, unsecured loans tend to carry higher rates, shorter terms, and lower limits than secured equivalents.
Most unsecured business lenders require a personal guarantee (PG) from the director or directors of the limited company. A PG means that if the company fails to repay, the individual guarantor becomes personally liable for the outstanding balance. Directors should obtain independent legal advice before signing a personal guarantee, as it can put personal assets — including a family home if cross-collateralised — at risk.
Choosing the right structure
The right choice depends on the loan size, urgency, available assets, and directors' risk appetite. Secured lending suits larger amounts and longer terms where the company has assets to offer; it also tends to be more flexible on covenants. Unsecured lending is faster to arrange and preserves assets from encumbrance, but the personal guarantee transfers risk to the individual rather than eliminating it.
- Large loan with property security available → first-charge mortgage or debenture-backed loan
- Mid-size loan, company with strong financials → unsecured term loan with PG
- Fast working capital need → unsecured working capital loan
- Asset purchase → asset finance (asset is the security)
Frequently asked questions
Does a personal guarantee mean the lender can take my house?
A personal guarantee without a specific charge over your home does not automatically give the lender a right over residential property — but if they obtain a judgment against you personally, they could apply for a charging order over property you own. Some lenders ask for a guarantee limited to a specific amount or with a cap. Always take independent legal advice before signing.
What is a debenture?
A debenture is a legal instrument giving the lender a floating charge over all present and future assets of the company, plus in many cases a fixed charge over specific assets such as property or intellectual property. It is registered at Companies House. In an insolvency, a debenture holder typically ranks ahead of unsecured creditors.
Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.