Every year the number of filed bankruptcies increases, this common practice is often the only way out for many in dire financial situations. Even though it’s a regular occurrence, there is still a lot of confusion surrounding bankruptcy.
And that’s for good reason, there are several options and scenarios that a person could go through to get relatively the same result. It can be overwhelming to look through all of the choices and try to find the one that will work best for you and your specific situation. And that’s where we come in to help!
We’re going to cover everything you need to know about debtor-in-possession financing to help you decide if it’s a good option for you or not.
Before making any decisions about how to file for bankruptcy, it’s important to make sure you understand the basics of bankruptcy to ensure you actually need this type of help.
Bankruptcy is a way for debts to be forgiven if the debtor is unable to pay, though there are consequences and strings attached. Often that makes it harder to get financing to rebuild. DIP financing is an option that allows companies to get a special loan while they are in the process of filing bankruptcy.
This type of financing isn’t given out freely and a company must meet specific qualifications in order to get the money. It’s helpful to know that up front before wasting the time to apply.
Most companies will need to show proof of restructuring within the business and show how the money coming in should increase with those changes. The bankruptcy and debt finance help shouldn’t be the only strategies a company is using to get itself into a better financial situation.
Benefits of Financing
Obviously, the main benefit of this type of financing during filing bankruptcy especially chapter 11 is that the company can stay open. Especially since many companies don’t survive that type of financial situation.
These loans allow the business to have a second chance to improve and start making money again, it’s a great way for many to get back on their feet.
Though it’s not right for everyone, so you can view more info here to see if it’s the right choice for your company.
Everything to Know About Debtor-in-possession Financing
Getting to the point of filing bankruptcy is a long, often lonely and difficult road to go through. Once you’re at that point, there are so many decisions to make it and it’s critical to make the right ones.
A bankruptcy will affect the life of the filer for the next several years, at least. So you want to choose the one that will work the best to get you the relief you need while still allowing you to move forward in the future. Often debtor-in-possession financing can be a great option for companies to be able to move forward and make the necessary changes.
If you’re interested in learning more about business and finances, check out our other articles today!
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