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floating charge

Definition

Lien or mortgage on an asset that changes in quantity and/or value from time to time (such as an inventory), to secure the repayment of a loan. In this arrangement, no charge is registered against the asset and the owner of the asset can deal in it as usual. If a default occurs, or the borrower goes into liquidation, the floating asset 'freezes' into its then current state—'crystallizing' the floating charge into a fixed charge and making the lender a priority creditor. See also fixed charge.

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