Quick answer
A debenture is a document in which a company acknowledges a debt and promises to repay it, often with security over the company's assets. In Australia the word has two everyday uses: an investment where the public lends money to a company, and, in older lending documents, a charge giving a lender security over a company's assets. Since the PPSR began in 2012, that second role is usually filled by a general security agreement.
Key points
- A company's written acknowledgement of a debt, usually with a promise to repay with interest
- As an investment, the label 'debenture' is restricted to issues secured over tangible property
- Older business loans used a 'debenture charge' over company assets
- Since 30 January 2012, new company security is registered on the PPSR, typically under a GSA
The word comes from the Latin debentur, “they are owed”, and that’s still the heart of it. A debenture is a company putting in writing that it owes money and will pay it back. What has changed over time is how Australians use the word, and that can make old loan documents confusing.
The two meanings you’ll come across
1. A debenture as an investment. Here the public lends money to a company, usually for a fixed term, in return for regular interest. The company uses the money to run its business, which for many issuers has been property development or lending. Under the Corporations Act, the label is controlled. Moneysmart explains that the security offered decides the name:
- Debentures: secured by tangible property, such as real estate or equipment
- Secured notes: backed by a first-ranking security over other property
- Unsecured notes: no security at all
These products are normally unlisted, so you deal directly with the issuer and generally can’t sell early. Moneysmart’s warning is blunt: investors can lose some or all of their money if the company fails.
2. A debenture as company security. In business lending, “debenture” or “debenture charge” was long used for the document a company signed giving its lender a charge over its assets. Typically it combined a fixed charge over specific assets, such as plant and equipment, and a floating charge over everything else, including stock and debtors, which the business could keep trading with until the lender stepped in.
What happened in 2012
On 30 January 2012 the Personal Property Securities Register began operating and ASIC’s register of company charges closed. Existing charges were migrated across to the new register. From then on, a lender taking security over a company’s assets other than land registers a security interest on the PPSR, usually under a general security agreement, or GSA.
So if you’re reading a facility agreement drafted before 2012, “debenture” is probably describing what a modern lender would call a GSA. Some lenders and lawyers still use the older terms out of habit. If a document refers to a debenture over your company, ask the lender to confirm what it covers and where it’s registered.
Not sure what security sits over your company right now? We can talk it through with you.
Why it matters when you borrow
The security behind a debt decides who gets paid first if a business fails. ASIC’s guide for creditors explains that secured creditors are dealt with from the assets their security covers, and unsecured creditors share whatever is left. A lender holding a debenture or GSA over all your company’s assets ranks ahead of trade suppliers and other unsecured creditors.
That also affects your next loan. If an existing financier already holds an all-assets security, a new lender will see it on a PPSR search and know it would rank second. It may ask for the first lender’s consent, a deed of priority, or property security instead.
An Australian example
A family-owned printing company in Adelaide signed a “debenture” with its bank in 2009 to secure an overdraft. When the bank renewed the facility a few years later, it re-papered the security as a GSA and registered it on the PPSR. The overdraft was closed in 2021, but nobody asked the bank to remove the registration. In 2026 the owners applied to a non-bank lender for equipment finance, and its PPSR search showed the old bank still holding an all-assets interest. Once the bank lodged a discharge, the new lender registered its own interest and the deal went through. Searching the PPSR before applying would have saved a fortnight.
Related terms
- General security agreement: the modern replacement in lending.
- Floating charge: security over assets the business trades with.
- Secured creditor: a creditor holding security such as a GSA.
- Senior debt: debt that ranks first for repayment.
Raising money without a debenture issue
For most owners, issuing debentures to the public is far more than the job calls for. A secured business loan, equipment finance or a facility backed by property usually gets the money in faster and with much less paperwork.
Tell us what you need through our short form; it takes about a minute and won’t affect your credit rating. We won’t scatter your details across dozens of lenders. A real person reads your enquiry and rings you, and if you fill it in carefully, including any existing security over the company, we can point you in the right direction from the start.
Frequently asked questions
Is a debenture secured or unsecured?
When it's offered to investors, a debenture must be secured by a charge over tangible property such as real estate. If the security is weaker or there is none, the issuer must use a different name, such as unsecured notes. In lending documents, a debenture charge was a form of security.
What is a debenture charge?
It's an older name for a charge a company gave a lender over its assets, typically a fixed charge over specific assets and a floating charge over the rest. These were registered with ASIC until the PPSR replaced ASIC's company charges register in 2012.
Is a debenture the same as a general security agreement?
They do a similar job. A general security agreement is the modern document a lender uses to take security over all of a company's present and after-acquired property, registered on the PPSR. Older loans may still refer to a debenture or a fixed and floating charge.
Are debenture investments safe?
Not necessarily. Moneysmart warns that returns aren't guaranteed and investors can lose their money if the issuer fails. They're usually unlisted and locked in for a fixed term, so getting your money back early can be difficult.
Can a small business issue debentures to raise money?
Offering debentures to the public involves a prospectus, a trustee and ongoing obligations under the Corporations Act, so it's rarely practical for a small business. Most owners use loans, equipment finance or property-secured facilities instead.