| Own a company in chapter 11 bankruptcy and | | | | an alternative for most debtor in possession |
| need financing? Read this article to learn | | | | companies, are there other alternatives? In |
| about DIP financing. | | | | fact, there are. There is an option that is |
| Going through a chapter 11 bankruptcy | | | | usually overlooked by most. It's called |
| processes can be one of the most harrowing | | | | factoring. Furthermore, as opposed to other |
| experiences that a business owner can go | | | | alternatives, it's easy to obtain and setup. |
| through. You will have to deal with the | | | | If your company sells products or services to |
| courts' involvement in your business and deal | | | | other businesses (or government agencies) you |
| with endless negotiations with your secured | | | | most likely have to wait 30 to 60 days to get |
| and unsecured creditors. You will also have | | | | your invoice paid. Waiting to get paid can |
| to deal with the uncertainty of not knowing | | | | negatively impact your liquidity, as you will |
| whether your business will survive the | | | | need the funds to pay suppliers, employees |
| process. One way to help your chances of | | | | and other business expenses. By factoring |
| business survival is to obtain debtor in | | | | your invoices, you can get an advance on your |
| possession financing. Debtor in possession | | | | slow paying invoices. This provides you the |
| financing is a type of financing that is | | | | cash liquidity you need to meet your payment |
| extended to companies that are about to go or | | | | obligations. Qualifying for accounts |
| are undergoing chapter 11 reorganization. It | | | | receivable factoring tends to be a lot easier |
| provides the company with the liquidity that | | | | than obtaining other types of financing. The |
| is needed to operate through the | | | | biggest requirement is that you do business |
| reorganization process and provides the | | | | with reputable commercial or government |
| lifeline that may help the company emerge | | | | clients. It also works best if one of your |
| from the bankruptcy process. Most | | | | biggest challenges is lack of liquidity due |
| conventional debtor in possession financing | | | | to slow paying clients. Generally, factoring |
| is hard to obtain and usually not readily | | | | financing lines can be established very |
| available to small and medium sized | | | | quickly. However, debtor in possession |
| companies. For example, few banks will | | | | financing requires the approval of the court |
| provide business financing to bankrupt | | | | and of your secured (or senior) lenders, |
| companies. This is understandable, as banks | | | | which should be taken into consideration. In |
| usually provide business loans to companies | | | | summary, receivables factoring remains a |
| that have solid financials, hardly the case | | | | strong a viable alternative that need |
| for a company going through a chapter 11 | | | | flexible debtor in possession financing. |
| reorganization. Since a business loan is not | | | | |