Security is an asset that a business pledges against a loan, giving the lender a way to recover what it is owed if the loan is not repaid. A loan backed by an asset is described as secured; one without is unsecured.
Common forms of security
Security can take several forms depending on the lender and the type of borrowing. The detail always sits in the agreement, so the only reliable guide for your facility is your own paperwork.
- A charge over a specific business asset, such as equipment or property.
- A debenture covering a company's assets more broadly.
- An assignment of certain receivables, in some forms of finance.
Secured versus unsecured borrowing
Secured borrowing can sometimes carry different terms because the lender has an asset to fall back on. Unsecured borrowing relies on the company's standing and obligation to repay. Neither is automatically better; it depends on your circumstances and the agreement.
Credicorp lends only to UK limited companies and LLPs for business purposes and does not take personal guarantees from directors. Whether and how any security applies to a Credicorp facility is set out in your agreement, so check the terms or ask our team if you are unsure.
See also: How lenders assess a business loan application, Is there a penalty for repaying early? and What does unsecured mean?.