Companies borrow money from a range of sources, including their directors and shareholders, personal contacts, banks, venture capital companies, institutional investors and (PLCs only) through the Stock Exchange.
Many companies borrow from their directors and shareholders, either formally, perhaps granting them a debenture, or informally, with just book-keeping records, such as a director's loan account. Lending money or assets to the company can be an alternative to putting it in as share capital (see related topic: How many shares should a company have?).
If a private company borrows from its bank, the bank will probably require the directors to give personal guarantees of the debt and, depending on the amount, may want security over the company's assets, or perhaps other property, such as second mortgages on the directors' homes. Security over the company's assets is usually in the form of an 'all-monies' debenture, secured with fixed and floating charges over all the company's assets. Once signed, this will cover all future arrangements the bank makes with the company - overdraft facilities, loans for specific purposes, etc. In most cases, the terms are for repayment on demand, and any default will allow the bank to claim from the directors immediately on default by the company if they have given personal guarantees.
Borrowing from venture capital companies and, sometimes, from other financial institutions, is often part of a larger finance package involving shares and loans.
In most cases of borrowing a debenture is issued. A debenture is the traditional name given to a loan agreement where the borrower is a company.