IVA Glossary
F
Floating Charge
Floating charges are securities which are characteristic mainly to companies and not individuals. Within a floating charge, the company's assets, plant and machinery, or stock in trade may be regarded as charge. Whenever a company takes out a loan, the lender usually requires collateral as security, in order to make sure he will recuperate his loss in the event the borrower defaults on it.
If the lender will put a fixed charge on the loan, it means that in the event the company is unable to repay the debts, it must sold its property (commercial property usually) and repay the debts in full. But when it s a floating charge in force, the security for the loan is not the property (the company may be active within a property that is rented for example), but on the other assets (called floating assets).
A floating asset by definition is that asset which's value constantly changes (for example the vehicles owned of a transportation company). In the floating assets category also enter the outstanding shares, the accounts receivable and the cash the company owns.
If the lender will put a fixed charge on the loan, it means that in the event the company is unable to repay the debts, it must sold its property (commercial property usually) and repay the debts in full. But when it s a floating charge in force, the security for the loan is not the property (the company may be active within a property that is rented for example), but on the other assets (called floating assets).
A floating asset by definition is that asset which's value constantly changes (for example the vehicles owned of a transportation company). In the floating assets category also enter the outstanding shares, the accounts receivable and the cash the company owns.
