Fixed and floating charges are a technical way for a financial institution lending money to secure some of it. A fixed charge is usually ‘secured’ on a specific asset, such as property or machinery. With a fixed charge, the company that borrows money could not sell the asset without the permission of the organisation that has lent it.
A floating charge is not tied to a specific asset however is usually secured on things like raw materials or component stocks. The borrower can use the stock to do business replacing them when necessary. However should the charge be applied or ‘crystallise’, (i.e. as a result of not paying interest on time) whatever stock that is covered by the floating charge which is in the business at that time becomes subject to the charge and cannot be used without the permission of the charge holder (the lender).