Debtor-in-Possession (DIP) Financing provides critical capital to companies operating under Chapter 11 bankruptcy protection. It ensures operational continuity by funding essential expenses like payroll, inventory, and restructuring costs—while offering lenders superpriority status over existing claims, subject to court approval.
What is DIP Financing?
DIP financing is a specialized loan made available to distressed businesses during reorganization. It allows operations to continue throughout bankruptcy proceedings and provides the cash flow needed to stabilize, restructure, and recover. Great Elm Commercial Finance offers customized DIP solutions designed to meet court requirements while preserving enterprise value and protecting stakeholders.
DIP loans sustain operations during restructuring—helping businesses preserve value, meet obligations, and emerge stronger post-bankruptcy.
What types of assets qualify as collateral?
Accounts Receivable
Inventory
Machinery
Equipment
Commercial Real Estate
Debtor In Possession
When is DIP Financing the Right Fit?
If your business is unable to meet payroll, vendor obligations, or other critical costs during Chapter 11, DIP financing provides fast, court-approved funding to keep operations running.
DIP loans support the financial restructuring process by stabilizing cash flow, building creditor confidence, and improving the likelihood of a successful emergence from bankruptcy.
Companies with a strong underlying business model but facing short-term distress can use DIP financing to regain stability, restructure obligations, and return to profitability.
DIP financing can stabilize operations long enough to prepare for a strategic sale of assets or business lines through a Section 363 sale, maximizing value for stakeholders.
DIP financing signals a credible path forward and improves creditor relations
Frequently Asked Questions
DIP (Debtor-in-Possession) financing is a court-approved loan made to companies operating under Chapter 11 bankruptcy. It provides critical funds to continue operations and is repaid before most other debts due to its superpriority status.
Businesses that have filed for Chapter 11 and can demonstrate a path toward successful reorganization or sale may qualify. Lenders assess the viability of the debtor’s plan and assets before extending DIP funding.
DIP loans provide immediate liquidity, preserve going concern value, boost creditor confidence, and help businesses stabilize operations during restructuring.
Often, yes. DIP lenders may receive a lien on the debtor’s unencumbered assets or a priming lien over existing ones, depending on the court’s approval and existing creditor arrangements.
Approval is granted by the bankruptcy court after evaluating the terms of the loan and ensuring it is in the best interest of the debtor and creditors. Emergency or interim approval may also be requested.
Yes. DIP loans are commonly used to stabilize operations prior to a 363 asset sale or to finance a company through reorganization, helping increase buyer confidence and final transaction value.
DIP lenders receive superpriority claims and often favorable interest rates and fees. They also have influence over the restructuring process, enhancing protections and potential returns.