Banking

Virtually all businesses in the current climate will need to give some form of security to the bank.

Our Commercial Team have extensive experience in acting for both borrowers and lenders and are able to advise on all variations of security documentation – from the standard legal charges and debentures through to any cross-guarantees, loan agreements and the facility agreement itself.

We also enjoy strong relationships with a number of banks and other independent funders, so may be able to identify alternative opportunities should the need arise. Please feel free get in touch with us to discuss any opportunities. 

Can I operate my business simply using my overdraft facility?

This will be very much dependent on the circumstances, what your standing is with your bank and perhaps even who your bank is. It may well be that if you are a Limited Company, your bank will ask you to Personally Guarantee the Overdraft in order to provide security. Considered advice should always be taken before giving any kind of Personal Guarantee – it may even be that you will personally need to see another solicitor in order to ensure you have been given independent advice.

My bank won’t extend my overdraft, but has offered me a Loan instead – what is the difference?

Your overdraft facility is a form of loan, albeit that it does not attract interest (unless you breach the terms of the facility). A Loan however will ordinarily be for a fixed amount, which is subject to interest, and creates an expectation on the business to make repayments over a period of time.

The disadvantage of an overdraft is that the Bank can technically withdraw the facility at any time – with a Loan the bank are committed to letting the facility run its full course, unless you are in breach of any of its terms.

What is the difference between a fixed charge and a floating charge?

It is not always as simple as the name would suggest. A fixed charge is actually fixed against certain assets – the simplest example being your house or business premises. A fixed charge will restrict your ability to sell or otherwise deal with that assets subject to the charge.

A floating charge also relates to certain assets, but unlike the fixed charge it will allow you to sell the assets subject to the charge – the simplest example being any stock held by the business. If the Bank needed to enforce a floating charge it would ‘crystallise’ the debt after which you are no longer entitled to sell the assets subject to the charge.

For further information and advice regarding Banking and your Business please get in touch with our Business and Commercial Law team.