Floating charge

Ok kiddo, let me explain what a floating charge is. Imagine you have a piggy bank that you keep all your money in. When you put money into your piggy bank, you know exactly how much money you have at all times. But what if someone else wants to lend you some money? They may not want to just give you money and hope you can pay it back. Instead, they might ask for a floating charge on your piggy bank.

What does that mean? Well, a floating charge is like a loan that is secured by something that can change in value over time. For example, let's say you have a business and you own a bunch of equipment. Instead of giving your equipment as collateral for a loan, you might give a floating charge on the equipment. That means that the lender can take control of your equipment if you don't pay back the loan, but you can still use the equipment as usual.

So why is it called a "floating" charge? It's because the charge "floats" over the assets that are being used as collateral. If you were to sell some of the equipment in our example, the value of the floating charge would go down because there is less equipment to use as collateral. But if you were to buy new equipment, the value of the floating charge would go up.

Overall, a floating charge is a way for lenders to protect themselves when they lend money to someone who has assets that can change in value over time.