CIMA F2 Syllabus A. Financing capital projects - Security - Notes ^{12 / 13}

Bonds may be secured and bank loans are often secured.

Security may take the form of either a fixed charge or a floating charge.

Fixed charge	Floating charge
Security relates to a specific asset/group of assets (eg land and buildings).	Security relates to a certain group of assets which will be constantly changing (eg trade receivables or inventory).
The company can't dispose of assets without providing substitute/consent of lender.	The company can dispose of assets until default takes place.
	In the event of default. the lender appoints a receiver rather than laying claim to assets.

Investors are likely to expect a higher yield with unsecured bonds to compensate them for the extra risk.

Similarly, a bank may charge higher interest for an unsecured loan compared with a similar secured loan.