What is a fixed charge related to loan capital?

A fixed charge related to loan capital is a form of security interest granted over specific assets of a company. This means that the lender takes a legal claim on particular assets identified at the time the charge is created. In the event of default by the borrower, the lender has the right to seize and sell those specific assets to recover the debt owed.

This type of security is distinct from other forms of security; for instance, it is not an overarching claim on all the company's assets, which would be characteristic of a floating charge. Instead, a fixed charge precisely delineates which assets are secured, providing clarity and reducing risk for the lender. Such assets might include real estate, machinery, or equipment that is critical to the company's operations.

The other answer options do not accurately describe a fixed charge. For example, a fixed charge does not pertain to all company assets, nor does it grant permission to sell assets; rather, it restricts the borrower's ability to dispose of the secured assets without the lender's consent. Additionally, while fixed charges are often created in conjunction with loans that involve interest payments, stating that a fixed charge is specifically "interest bearing" misconstrues the nature of the charge itself, as the interest relates to the loan rather than