A debenture is a document that either creates a debt or acknowledges it, by putting up the company’s assets as collateral against debt. Unlike a personal guarantee, the debenture does not impose any additional risk on the company’s shareholders or directors.

In most companies the bank already has a debenture over the company’s assets, as a prerequisite for various corporate transactions. However, in the case a bank does not have any debentures over a company’s assets it is possible to implement a debenture, that allows us to take control of assets, including intellectual property, in the event of default.

Ultimately, using a debenture to secure a loan reduces the loan’s implied risk, thus not only giving lenders an increased sense of security regarding their loan, but also reduces the borrower’s financing costs, without any additional personal commitments.

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