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What Is Debtor-in-Possession Financing?

April 26, 2017debtor-in-possession financing

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What Is Debtor-in-Possession Financing?

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Also known as DIP financing, debtor-in-possession financing is any type of lending or credit that is extended to a business currently under a Chapter 11 bankruptcy process. The idea behind this type of financing is typically to allow the distressed company to continue operations and eventually return to a state of profitability. In order to qualify for debtor-in-possession financing, businesses must be in full compliance with the obligations related to the bankruptcy action, as documented in the company’s court ordered reorganization process. Specific lenders may also require additional restrictions as well, depending on the overall status of the company.