Published 29 September 2026 | By FJP Investment Editorial Team

Secured.

It is one of the most reassuring words an investor can see in an investment presentation.

A company may describe an opportunity as property backed, asset backed, secured against real estate or supported by a legal charge over identifiable assets.

Those features can be extremely important.

But they do not mean the investment is guaranteed, and they certainly do not mean that an investor can stop analysing the underlying borrower.

The real question is not simply whether security exists.

It is:

What is the security, what is it actually worth, where does the investor rank and what happens if it has to be enforced?

For experienced investors looking at private debt, property finance, bonds, loan notes and other asset-backed investments, understanding those questions can make the difference between meaningful downside protection and security that looks considerably stronger in a brochure than it proves to be during a default.

This guide explains some of the terminology investors encounter and the questions worth asking before relying on the word “secured”.

Important: This article is provided for general educational purposes only. It does not constitute investment, legal or tax advice or an invitation or recommendation to invest. Asset-backed and secured investments can still result in partial or total loss of capital.

What is an asset-backed investment?

The term can be used quite broadly.

At its simplest, it describes an investment where identifiable assets form part of the security or economic support behind an investor’s position.

Those assets might include:

• residential or commercial property;
• development land;
• receivables;
• equipment;
• vehicles;
• inventory;
• financial assets;
• shares in subsidiary companies;
• contractual income streams; or
• other business assets.

However, investors should distinguish the general phrase asset backed from the specific institutional market for asset-backed securities.

A privately issued loan note secured against property, for example, is not automatically the same thing as a securitised bond backed by a large portfolio of mortgages or receivables.

The underlying legal structure matters considerably more than the marketing terminology.

What does “secured” mean?

Broadly, secured lending means that a borrower has granted the lender rights over specified assets as security for its obligations.

If the borrower fails to repay according to the agreed terms, those security rights may potentially be enforced.

For a UK company, a legal security interest may also be registered as a charge.

Companies House describes a charge simply as security that a company gives for a loan, with a mortgage being one familiar example.

Its current guidance is available through Companies House guidance on registering company charges.

That legal security can materially improve a creditor’s position.

But it does not create money where none exists.

Secured does not mean guaranteed

Suppose an investor lends £100,000 to a business under a secured loan-note arrangement.

If everything proceeds according to plan, the security may never have any practical role at all.

The company pays its interest and eventually repays the £100,000.

Security becomes most important when the company cannot do that.

At that point, the relevant questions become:

• Does the secured asset still exist?
• What is it worth today?
• Who else has rights over it?
• Who ranks ahead of the investor?
• Can it legally be enforced?
• How long will enforcement take?
• What will it cost?
• How much will actually remain after a sale?

A security package can improve potential recovery.

It cannot guarantee full recovery.

What is a legal charge over property?

Property is probably the most familiar form of investment security.

A lender can take a legal charge over land or property, broadly similar in concept to the charge a mortgage lender takes over a home.

For registered land in England and Wales, charges can be registered at HM Land Registry.

The property’s title register can show mortgages and other financial charges secured against the property.

HM Land Registry explains how this information appears in the charges section of a title register.

For an investor assessing property-backed private debt, verifying the title and charges can therefore be an important part of due diligence.

What is a first legal charge?

A first charge normally indicates that the lender has priority over subsequently ranking secured lenders in relation to the charged asset, subject to the detailed legal arrangements.

Imagine a property worth £10 million with £5 million owed to a lender holding the first charge.

If the borrower defaults and the property is ultimately sold for £8 million, the first-ranking lender would normally expect its secured claim to be dealt with before a lender holding a lower-ranking charge.

This priority is extremely valuable.

HM Land Registry’s current Practice Guide 29 explains that registered charges generally rank between themselves according to the order in which they appear in the register, unless the register records a different priority arrangement.

You can read the updated HM Land Registry guidance on legal charges.

What is a second charge?

A second-ranking secured lender sits behind the first lender in the repayment hierarchy for the relevant security.

Consider the same £10 million property.

Suppose:

• the first-ranking lender is owed £7 million; and
• a second-ranking private lender is owed £2 million.

The headline borrowing is £9 million against a £10 million valuation.

That might initially appear to leave £1 million of equity.

But suppose the borrower fails during difficult market conditions and the property eventually sells for £7.5 million.

There may also be:

• accrued interest;
• legal expenses;
• receiver costs;
• sales costs;
• property maintenance; and
• other enforcement expenses.

The first lender could absorb most or all of the proceeds.

The second-ranking creditor’s recovery might therefore be considerably weaker.

This is why the words secured on property are not enough.

Ranking matters.

What is loan-to-value?

Loan-to-value, normally abbreviated to LTV, compares the amount of debt with the value of the asset supporting it.

If £5 million is secured against property worth £10 million, the headline LTV is 50%.

That suggests a substantial valuation cushion.

If £9 million is secured against the same £10 million asset, the LTV is 90%.

The second position obviously leaves considerably less room for values to fall.

But LTV figures are only useful if investors understand both sides of the calculation.

Ask:

• Which debt has been included?
• Does the figure include accrued interest?
• Are there senior creditors?
• Which valuation has been used?
• Is it the value today or a future projected value?
• How recent is the valuation?

Current value and future value are not the same thing

This distinction becomes particularly important with development finance.

A development might have:

• a current land value;
• a current value with planning;
• a current value reflecting construction completed so far;
• a projected value on completion; and
• a projected gross development value once all units are completed and sold.

Those numbers can be dramatically different.

Suppose a partially completed project is worth £8 million today but expected to be worth £20 million once finished.

Describing £10 million of lending as 50% of the £20 million future value creates a very different impression from recognising that the existing asset is currently worth less than the debt.

Future value may be relevant when analysing a development.

But investors should know when that is the number being used.

Who valued the asset?

Not all valuations deserve equal weight.

An investor should establish:

• who instructed the valuer;
• whether the valuer is independent;
• their relevant professional qualifications;
• the valuation date;
• the valuation basis;
• the assumptions used;
• whether the asset was physically inspected;
• whether planning assumptions were made;
• whether the valuation assumes completion; and
• whether the report can be relied upon by the relevant lender or security holder.

Valuation becomes especially important in private markets because there may be no daily traded price for the underlying asset.

The FCA has highlighted valuation judgement, governance and conflicts as important considerations across private markets.

Market value is not necessarily recovery value

This point deserves particular attention.

An asset may legitimately be valued at £20 million under normal market conditions.

If the borrower defaults, the circumstances may be anything but normal.

A secured creditor might face:

• a forced sale;
• a partially completed project;
• adverse publicity;
• urgent funding requirements;
• deteriorating assets;
• limited buyers;
• a falling market; or
• a lengthy insolvency process.

The eventual amount realised may therefore be materially below the previous valuation.

This is why an investor should consider not only the optimistic case but the downside recovery case.

What is a fixed charge?

A fixed charge broadly attaches to a particular asset or category of assets and can restrict the company’s ability to dispose of that asset without the lender’s consent.

Depending on the structure, fixed security may be taken over assets such as:

• land and buildings;
• specific machinery;
• bank accounts;
• shares;
• intellectual property; or
• other identifiable assets.

The precise legal effect depends on the documentation and circumstances.

Investors should therefore rely on the actual security documents rather than simply an investment summary describing security as “fixed”.

What is a floating charge?

A floating charge commonly applies over a changing pool of company assets.

For example, a business may continually acquire and sell inventory or generate new receivables.

Taking individual fixed security every time the asset pool changed would be impractical.

A floating charge can instead cover a class of assets that changes during normal business activity.

If certain events occur, including insolvency or events defined within the security documents, that floating security can become enforceable.

Floating charges can be commercially useful, but creditor priority in an insolvency is more complicated than simply saying:

“We have a charge over all the company’s assets.”

Preferential claims, fixed-charge creditors and insolvency costs can all affect ultimate recoveries.

What is a debenture?

In UK corporate lending, investors may encounter a debenture.

The word can mean different things in different markets, but in secured UK corporate lending it often refers to a security document granting a lender a package of fixed and floating charges over company assets.

A debenture might therefore include security over:

• property;
• bank accounts;
• receivables;
• plant and machinery;
• intellectual property;
• shares;
• contracts; and
• other present and future assets.

Again, investors should read what the actual document secures rather than assuming every debenture gives exactly the same rights.

Can investors check company charges?

Yes, to an extent.

Charges created by UK companies can appear on the company’s public Companies House record.

Companies House states that a charge normally needs to be registered within 21 days of creation; failing to register it in time can create serious problems recovering the debt if the company subsequently becomes insolvent.

The public filing can include a certified copy of the relevant charge instrument.

This can provide useful due-diligence information.

However, a Companies House search should not be treated as a complete legal analysis.

It is also worth knowing that Companies House does not require a company to notify it every time a charge has been fully repaid, meaning some historic charges can remain shown until the appropriate satisfaction filing is made.

Legal advisers should therefore interpret the filings in the context of the transaction rather than relying on the status label alone.

Property security should also be checked at HM Land Registry

Where the security involves registered property in England or Wales, the title register is another important source.

The Charges Register can show registered mortgages and other financial charges affecting the property.

One important limitation is that the title register will not necessarily tell an investor exactly how much is currently owed under each facility.

Therefore, seeing that a bank has a charge tells you that security exists.

It does not automatically tell you whether the bank is owed £100,000 or £10 million.

Understanding the debt position may require additional financial and legal information.

What is a security trustee?

When an investment involves many investors, having each investor individually registered against each secured asset can be impractical.

Some structures therefore appoint a security trustee.

The trustee holds security for the benefit of the investor group under the relevant trust and security documents.

If a default occurs, the trustee may have responsibility for taking enforcement action in accordance with those documents.

An investor should understand:

• who the security trustee is;
• whether it is independent of the borrower;
• what security it actually holds;
• when it is permitted or required to enforce;
• how investors give instructions;
• what voting thresholds apply;
• whether the trustee can agree amendments;
• how costs are paid; and
• what happens if investors disagree about enforcement.

A security trustee is an administrative and legal mechanism.

Its existence should not be confused with a guarantee that investors will recover their capital.

What is an intercreditor agreement?

Where several different lenders have security over the same borrower or assets, an intercreditor agreement can determine their respective rights.

It can deal with matters such as:

• priority of repayment;
• security ranking;
• who controls enforcement;
• whether junior lenders can take independent action;
• how enforcement proceeds are distributed;
• standstill periods; and
• how amendments or restructurings are handled.

This can be highly significant for a subordinated investor.

A second-ranking lender may technically have security while having very limited ability to enforce it independently because the senior lender controls the process.

What does cross-collateralisation mean?

Sometimes several assets support the same lending facility.

For example, a property company might provide security over a portfolio of ten developments rather than one individual site.

This can potentially improve diversification of the security pool.

But investors should understand whether:

• all assets genuinely secure their investment;
• other lenders also have claims on those assets;
• assets can be released from the security;
• sale proceeds must be used to repay debt;
• new borrowing can be added; and
• the valuation is based on the portfolio collectively or property by property.

The words £50 million asset portfolio can sound impressive while telling investors relatively little about the actual net security position.

What is asset coverage?

Asset coverage looks at how much underlying value exists relative to the debt or investment liability.

Suppose an investment has:

• £20 million of investor liabilities; and
• £40 million of assets supporting those liabilities.

On a simple headline basis, that represents 2x asset coverage.

Again, investors should investigate what sits behind the calculation.

Are the assets:

• independently valued?
• already completed?
• liquid?
• owned by the correct legal entity?
• free from senior security?
• capable of being realised?

Two times coverage based on liquid completed property with no senior debt is very different from two times coverage based on projected development values several years into the future.

Who actually owns the secured asset?

This is another deceptively simple question.

An investment presentation may describe a group as owning substantial property or business assets.

But the investor needs to know which legal entity owns them.

If investors lend to Company A while the valuable property is owned by Company B, the fact that the two companies share the same ultimate shareholders does not automatically give Company A’s creditors security over Company B’s property.

Proper security has to connect the relevant obligations to the relevant assets through the appropriate legal documentation.

Security over shares rather than the underlying property

Some structures provide security over shares in a company that owns an asset rather than taking a direct charge over the asset itself.

That can still have value.

But it is not identical.

The company whose shares are secured may itself owe money to other creditors.

The investor therefore needs to understand both:

• the value of the shares; and
• the liabilities sitting inside the company whose shares they represent.

A company owning a £10 million building but owing a bank £9 million does not necessarily have £10 million of equity value.

What happens when security is enforced?

The precise process depends on the security, documentation, borrower and legal circumstances.

Potential outcomes can include:

• appointment of a receiver;
• sale of secured assets;
• administration;
• restructuring;
• refinancing;
• negotiated repayment;
• sale of the underlying business; or
• other insolvency or enforcement procedures.

This may take considerable time.

The investor should therefore distinguish two questions:

Do I have legal security?

and

How quickly could that security realistically return cash to me?

They are not the same question.

Sometimes restructuring creates a better recovery than enforcement

Security gives creditors leverage.

It does not necessarily mean immediate enforcement is always the economically sensible choice.

Imagine a development that is 90% complete but the borrower has run short of working capital.

Forcing an immediate sale of the unfinished project might produce a poor result.

Providing time for the project to finish, injecting additional capital or refinancing the senior lender might produce a significantly higher recovery.

On the other hand, repeatedly extending a fundamentally unsuccessful borrower can simply delay the recognition of losses.

Good creditor decision-making therefore involves judgement as well as legal rights.

Security does not replace borrower analysis

This may be the most important point in the article.

An investor should ideally want the borrower to repay from the success of the underlying business.

Security is the downside mechanism.

If an investment case depends primarily upon the belief that investors can always seize and sell assets when things go wrong, the credit analysis may already be starting from the wrong place.

Look first at:

• the business model;
• cash flow;
• profitability;
• management;
• existing leverage;
• use of funds;
• interest coverage;
• repayment strategy; and
• refinancing requirements.

Then assess how security improves the position if the borrower fails despite those fundamentals.

Our guide to private credit investing for international investors examines those borrower and credit questions in considerably more depth.

Why refinancing matters even when security is strong

A secured borrower may still depend on refinancing at maturity.

The Bank of England’s July 2026 Financial Stability Report highlights refinancing pressure within parts of private and riskier credit markets, particularly where borrowers originally took on leverage in a much lower interest-rate environment.

A borrower may own perfectly good assets while still experiencing a liquidity problem if it cannot refinance maturing debt on acceptable terms.

That distinction between asset value and available cash is fundamental in private credit.

A company can be asset rich and still default on a payment.

What about international investors?

The principles of security do not fundamentally change because the investor is in Dubai, Hong Kong, Singapore, Qatar, Oman, Bermuda or the Bahamas.

But distance makes documentation and independent verification particularly important.

An international investor should be able to establish:

• where the secured assets are located;
• which jurisdiction governs the security;
• which entity owns the assets;
• where charges are registered;
• who holds the security;
• how enforcement would take place;
• whether local legal advice has been obtained; and
• whether foreign investors have the same contractual rights as other investors.

An attractive photograph of a building in Britain is not evidence that an investor has legal security over it.

The documentation is what creates the security.

A practical security due-diligence checklist

When assessing an asset-backed investment, useful questions include:

• What exactly secures the investment?
• Who legally owns that asset?
• What is its current value?
• Who valued it?
• When was it valued?
• What assumptions were used?
• How much senior borrowing exists?
• What is the total secured debt?
• Where does my security rank?
• Has the charge been properly registered?
• Who holds the security for investors?
• What powers does that person have?
• Can further borrowing rank ahead of me?
• Can assets be released without investor consent?
• What happens after default?
• Who controls enforcement?
• How are enforcement costs paid?
• How liquid is the secured asset?
• What might it realise in a distressed sale?
• What happens if the security proves insufficient?

Our article on fixed-return investments provides a wider checklist covering the borrower, source of interest, repayment and investment terms.

Regulatory protection still matters

An investment can be secured and still be high risk or unregulated.

The existence of asset security does not determine whether the investment is protected by the Financial Services Compensation Scheme or whether the Financial Ombudsman Service is available.

The FCA currently warns that high-risk investments can involve a real possibility of losing all of the money invested and that many unregulated investments do not benefit from mainstream regulatory protections.

Its guidance on understanding high-risk investments explains these risks.

So investors should separately ask:

What security exists?

and

What regulatory protection exists?

One does not answer the other.

How FJP Investment looks at security

FJP Investment has operated within the alternative investment market since 2013 and considers opportunities across private debt, bonds, loan notes, property and development finance, growth capital and other specialist structures.

We act as an introducer rather than an investment adviser or investment manager.

Where an opportunity is presented as secured or asset backed, areas we seek to understand can include:

• the underlying asset;
• legal ownership;
• valuation;
• existing debt;
• security ranking;
• the relevant legal charges;
• security-trustee arrangements where applicable;
• the borrower;
• use of investor capital;
• the proposed repayment mechanism; and
• the downside position if the original business plan fails.

Security can be an important part of an investment structure.

It does not eliminate investment risk.

The purpose of reviewing security is to understand what additional creditor protection actually exists rather than simply repeating the description used in the investment material.

Our guide to UK alternative investments for international investors explains our broader approach to assessing private investment structures.

Frequently asked questions

Does asset backed mean guaranteed?

No. An asset-backed investment can still lose money. The value of the underlying asset may fall, other creditors may rank ahead of investors and enforcement can be expensive or unsuccessful.

What is a first charge investment?

A first-ranking legal charge generally gives the secured lender priority over subsequently ranking secured creditors in relation to the relevant asset, subject to the detailed legal arrangements and any agreed priority provisions.

Is a second charge still security?

Yes, but a second-ranking lender generally sits behind the first-ranking creditor. The amount owed to the senior lender can therefore materially affect how much value remains available to the second lender following a default.

What is a good loan-to-value ratio?

There is no universal safe LTV. Lower leverage generally provides a larger valuation cushion, but investors must also consider the valuation basis, senior debt, asset liquidity and the underlying borrower.

Can I check security at Companies House?

Charges created by UK companies can be registered on the Companies House public record, and copies of charge instruments may be available. The filings should form part of wider legal and financial due diligence rather than being relied upon in isolation.

Can I check a charge over UK property?

Registered mortgages and other charges over registered land in England and Wales can appear in the property’s HM Land Registry title register. The register will not necessarily show how much is currently owed to each lender.

What does a security trustee do?

A security trustee can hold security on behalf of a group of investors and exercise rights under the relevant security documents. Its precise powers and responsibilities depend on the transaction documentation.

What happens if the secured asset is worth less than the debt?

The secured creditor may recover less than the amount owed. Any shortfall then depends on the remaining contractual claims, available company assets and insolvency position.

Are secured alternative investments covered by the FSCS?

Not necessarily. Security over an asset and regulatory protection are separate issues. Many unregulated alternative investments do not benefit from FSCS or FOS protection.

Final thoughts

Security matters.

But the word by itself tells an investor very little.

A genuinely useful security analysis asks much more specific questions.

What asset?

Whose asset?

What value?

What debt?

What ranking?

What documentation?

Who controls enforcement?

And what is actually likely to be recovered if the borrower fails?

Jamie Johnson, CEO of FJP Investment, comments: “I’ve seen the word ‘secured’ used so often that I think investors almost need to train themselves to ignore it initially. Tell me what it’s secured against. Tell me what that’s worth today. Tell me who is ahead of us and show me the legal security. Once you’ve answered those questions, the word secured actually starts to mean something.”

The ideal outcome in any private-credit investment is that the security never needs to be tested.

The borrower executes its business plan, pays the agreed return and repays investors from the intended source.

Security exists for the scenario where that does not happen.

And it is precisely because that scenario is unpleasant that investors should understand the security properly before investing rather than after a default has occurred.

FJP Investment works with qualifying high-net-worth and sophisticated investors in the UK and internationally. If you meet the relevant investor criteria and would like to receive information about private debt, asset-backed and other alternative investment opportunities currently being introduced by FJP Investment, you can register below.

Capital is at risk. Asset-backed and secured investments can be unregulated, complex, illiquid and/or non-transferable, and security does not guarantee repayment. Asset values can fall and investors may lose some or all of their capital. Where an investment is unregulated, investors may not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme. FJP Investment acts as an introducer and does not provide personalised investment, legal or tax advice. Independent professional advice should be obtained where appropriate.