We might need you to sign a debenture to give you CBILS funds. It means that if you default on your loan, we’ll be able to claim the money from the assets your business owns, like laptops, property or machinery (but not your personal assets, like your house or car).
Is it the same as a personal guarantee?
No: with a debenture you’re not personally liable for the money. With a personal guarantee, someone - normally an owner, director or shareholder of the business - acts as a ‘guarantor’ on the loan. If the business isn’t able to pay back, then they have to.
With a debenture, only the business is liable for the money. So if you ‘default’ and can’t pay back, we’d only be able to claim on your business assets: computers, machinery and so on. (Unless you’ve also got a personal guarantee on your loan, of course.)
Why do I need to give one?
The debenture makes up part of our offer, just like the amount we lend. When you apply for a loan, we assess your business to work out how much to lend, at what price, and what type of security (like a debenture or a guarantee) we need to be able to make an offer.
What are ‘fixed’ and ‘floating’ charges?
There’s more detail in this guide to debentures. But briefly, fixed charges give us priority over specific assets (like property or equipment). Floating charges generally hover across all the business’ assets (including stock).
Not sure about anything?
It’s a good idea to get legal advice before you sign a debenture or personal guarantee.