Debtor-in-Possession (DIP) Financing
Debtor in Possession (DIP) Financing refers to a special type of funding available to companies that are undergoing Chapter 11 bankruptcy. In this situation, the company continues to operate its business while reorganizing its debts. DIP financing allows these companies to secure loans to maintain operations, pay employees, and manage expenses during the restructuring process. Such financing often has priority over existing debt, offering lenders some security. This helps the business stabilize and potentially emerge from bankruptcy stronger, benefitting both the company and its creditors in the long run.
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Debtor-in-Possession (DIP) financing is a special type of funding provided to companies that are undergoing bankruptcy procedures but still operate their business. In this situation, the company is called a "debtor in possession" because it retains control over its assets and operations. DIP financing helps these companies maintain cash flow to pay employees, suppliers, and other obligations while they restructure their finances. This type of financing typically comes with certain protections for lenders, as they know the business is under court supervision during the bankruptcy process, reducing risks associated with lending.