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Debtor-in-Possession Financing & Chapter 11 Loans
Debtor-in-possession financing, commonly called DIP financing, can provide liquidity to an eligible business operating under Chapter 11 bankruptcy protection.
At a glance
Debtor-in-possession financing, commonly called DIP financing, can provide liquidity to an eligible business operating under Chapter 11 bankruptcy protection.
MDN Capital Consulting helps evaluate financing requirements involving businesses and assets undergoing restructuring and can identify potential private-credit and special-situations capital sources. DIP financing is specialized, fact-specific and subject to applicable bankruptcy law and court approval.
Financing overview
Financing at a Glance
What Is DIP Financing?
DIP financing is financing obtained by a debtor while operating under Chapter 11. It can provide liquidity to maintain operations, preserve asset value, fund restructuring expenses or execute a court-supervised reorganization or sale process.
What Do DIP Lenders Evaluate?
- Available collateral
- Existing liens and lien priority
- Enterprise and/or asset values
- Cash requirements
- 13-week cash-flow forecast
- Proposed DIP budget
- Existing secured debt
- Bankruptcy pleadings and court orders
- Restructuring strategy
- Proposed exit
Hypothetical example
Illustrative Scenario — Asset-Secured DIP Request
A Chapter 11 debtor requires capital to maintain operations while pursuing a restructuring and asset disposition strategy. A lender would evaluate assets, existing liens, cash requirements, DIP budget, legal structure and anticipated repayment event.
Illustrative only. Financing and terms depend on lender underwriting.What Documents Are Usually Needed?
- Chapter 11 petition and key pleadings
- Existing capital structure
- Secured debt schedule
- Detailed collateral/asset schedule
- Existing appraisals or valuations
- Historical and current financial statements
- 13-week cash-flow forecast
- DIP budget
- Sources and uses
- Proposed restructuring or sale plan
- Requested loan amount and required funding date
Borrower questions
Frequently Asked Questions
What is a DIP loan?
It is financing provided to an eligible debtor operating under Chapter 11 and structured within the bankruptcy process.
Does DIP financing require court approval?
DIP financing is subject to the applicable bankruptcy process and court authorization.
Can DIP financing be secured by company assets?
Depending on the circumstances and approved structure, collateral may form an important part of the financing package.
How quickly can DIP financing close?
Timing varies substantially based on complexity, court process, collateral, diligence, negotiations and documentation.
What is the exit strategy for a DIP loan?
Possible repayment sources may include refinancing, asset sales, recapitalization or another restructuring event.
Financing inquiry
Need Capital During a Chapter 11 Restructuring?
MDN Capital can review the financing requirement, collateral package, capital structure and timing to determine whether the opportunity fits appropriate special-situations capital sources. Nothing on this page constitutes legal advice.
This content is for general information only and is not legal advice. DIP financing structures and authority to borrow are subject to the bankruptcy process and applicable court orders. Consult qualified bankruptcy counsel.