Alternative forms of security for a loan

We help clients protect their loans by taking security over assets as a guarantee against the risk of default.  Using our experience we explore the best and most secure type of security to secure your loan.

The most common form of security on lending is over land/property by way of a mortgage/charge or corporate assets by way of debentures.

Security if the borrower owns a business

Start-ups and ‘one man band’ companies often have sole director/shareholders and such individuals may personally have very little assets, rendering a personal guarantee or charge over property owned by the borrower either impractical, impossible or insufficient.

You can, under these circumstances, consider the following:

• a charge over their family or partner’s land/property -A third party (whether an individual or company) can grant security over land or properties owned by them for the liabilities owed to the lender by the business. Third Party Charges over Land will usually have enhanced rights of enforcement and protections as well as specific property enforcement powers, such as rights of receivership and powers of sale to offer the lender the maximum contractual protections over the land/property.
• a charge over a subsidiary or related company’s assets - the borrower’s family may own businesses or the borrower may have a parent or sister company that can grant security to you over its assets for the liabilities owed to the lender by the borrower. This can offer be in the form of a mortgage over property owned by the company and/or fixed charges over other assets such as plant and machinery and/or a floating charge over all current and future assets of the Company not otherwise mortgaged or charged.
• an equitable charge over their family or partner’s share portfolios - where a lender is lending to a person or company who holds shares in a company with sufficient assets but the other shareholders do not want to share in the liability of the borrower with a formal debenture over the whole company, the individual/company holding those shares (whether the borrower or a third party) can grant an equitable charge over the shares ensuring the prohibition of sale, transfer or granting of any security over the shares.

This involves negotiating with a number of interested parties to ensure the effective grant and perfection of the security

Personal Guarantees

We have acted for a variety of directors required to give a personal guarantee as security on lending. This can also achieve security in private lending if the director/shareholder has personal assets that can be secured against.

A family member or business partners of the borrower can also personally guarantee and indemnify lending, where such person guarantees their personal assets and promises to pay where the borrower fails to do so.

Corporate guarantors

Guarantees and Indemnities will impose restrictions on the guarantor personally. We have acted for lenders and borrowers where the borrower is a start up company with little assets by way of security and the directors could not provide sufficient security by way of a personal guarantee but had a well established parent company that could act as guarantor as security for the lending.