A floating charge is a type of security interest that covers a class of assets which may change over time—such as cash, inventory, or general business assets. Unlike a fixed charge, it allows the borrower to use or dispose of the assets in the ordinary course of business until the charge ‘crystallises’. In UK property development finance, floating charges are often used to secure secondary or mezzanine finance and are created under a debenture. They become fixed upon specified events, like insolvency, and rank below fixed charges and preferential creditors upon enforcement.
In practice, a floating charge gives lenders broader security over a developer’s business assets while preserving operational flexibility during the life of the facility. It is frequently documented alongside Contains Fixed Charge (s), creating a layered security package that captures both specific property-related assets and fluctuating business resources. As part of the wider framework of Securities and Collateral, floating charges can strengthen creditor protection where asset values and holdings change throughout a development project. Their commercial significance is particularly relevant where lender recoveries are linked to project performance and cash generation, reflecting concepts such as Return Tied to Cashflow Availability within the overall funding structure.
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