Debtor-in-possession, or DIP, financing helps a business to remain active and improve its current financial status. Chapter 11 bankruptcy allows Texas business owners to make payments without having to sell off their assets. They are allowed to work with creditors and lenders to choose the right type of financing plan.
DIP financing helps businesses
Debtor-in-possession financing assists companies after they file for Chapter 11 bankruptcy. The debtor in possession is the company that files for bankruptcy. The purpose is to help a business reorganize its finances, pay off its debts and raise capital. The result is that the business is able to fund its own operations successfully during and after bankruptcy.
The bankruptcy court must approve the terms of a DIP financing plan. Once it’s approved, the business is allowed to continue its operations. Then, the business’s clients and associates are informed that the debtor is still able to earn money, make payments and provide services to the public.
Evaluating the benefits
Chapter 11 bankruptcy is a long, complex process that requires long-term payments. The company is allowed to keep its assets while making money and paying off creditors. However, there are numerous legal fees to consider. Business owners need to decide if DIP financing is suitable for the situation.
Benefits of filing for Chapter 11
Many business owners are unfamiliar with all of the bankruptcy choices they have, and they do not understand the benefits of debtor-in-possession financing. This option helps restore the financial credibility of companies as they undergo bankruptcy proceedings. DIP financing is a type of long-term protection that is available to qualifying applicants under Chapter 11 bankruptcy.