Where Funding Circle takes “all asset security” from the company, this means that it gets:
(i) “fixed” security over fixed assets such as property and machinery; and/or
(ii) “floating” security over assets that change over time, such as stock
Having security over an asset (or group of assets) gives the creditor the right to receive all the funds from the sale of that asset until the underlying debt has been paid in full. Accordingly, if the borrower enters administration or liquidation the security would enable Funding Circle to rank ahead of unsecured creditors, such as landlords, trade creditors and HM Revenue & Customs.
Sometimes the security that we take is second-ranking behind a financial institution. In these circumstances we almost always enter into a deed of priority with the bank. The deed of priority is often negotiated, and we always seek to get a limit on amount secured by the bank’s security.
The security is set out in a document called a debenture, which is registered at Companies House. By registering the debenture we are informing the world that Funding Circle has security over those assets, so no other creditor may lay claim to them.