(Debtor in Possession Financing)
DIP Financing is for businesses that are in financial distress and plan to file or have filed for Chapter 11 bankruptcy, to protect themselves from creditors. DIP Financing will help many companies get back on track, provide restructuring support, and return to being profitable.
What is DIP Financing?
Many small business owners are unaware that after they have declared bankruptcy, there is a financial solution to help turn their company around. Debtor in possession or DIP Financing is a financial tool that allows a business to reorganize by having access to capital to keep operations going while the Chapter 11 bankruptcy process is underway. DIP Financing is unique, in that it usually has priority over existing debt, equity, and other claims for the creditor. However, DIP Financing is not for companies that want to liquidate their company.
DIP Financing allows troubled companies to show lenders that they have a detailed plan with a predictable outcome to turn their business around. The term ‘Debtor in Possession’ alludes to the fact that a company’s current management and board of directors still remain ‘in possession’ of the business after its Chapter 11 bankruptcy filing.
How does DIP Financing work?
Factoring your company’s accounts receivable (invoices) is one of the most flexible forms of DIP Financing. Invoice Factoring allows you to obtain funding and recapitalization during the Chapter 11 bankruptcy process. Companies that factor (sell their invoices as an asset) do not incur debt, but instead are advanced the capital they need from their work completed invoices. Your customer (the account debtor) then owes on the outstanding invoice. This also helps your business re-establish its credit, so eventually your company may qualify for traditional bank financing.
It is best to come to us prior to filing for bankruptcy, so we are able to help you establish and prepare the best Chapter 11 filing plan. This also allows us to file directly behind your bankruptcy filing, to ensure the process is not delayed. Although coming to us before filing for bankruptcy is ideal, ClearCoast may still be able to help your business after you have filed for Chapter 11.
Why does my business need DIP Financing?
Keep your company operating during and after filing for Chapter 11 Bankruptcy.
DIP Financing can use your outstanding invoices to provide the capital you need to keep your business afloat through bankruptcy. ClearCoast will also help with a restructuring plan to position your business for future success and growth.
Fast Funding for Your Business!
Benefits of DIP Financing
- Helps turn a distressed company around
- One of the very few options available
- Can be used before filing Chapter 11
- Capital available to keep the company going
- Your challenged credit is not an issue
- Working capital is funded immediately upfront
- We monitors and manages collections
- The business has more time to focus on making money
- Year of experience in DIP Financing
- Possibility for future growth