Factoring and Debtor in Possession Financing

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