DIP financing: Get the funding you need for a successful restructuring
Take advantage of Accord’s DIP financing to assist you with the critical liquidity you need to restructure your business.
Debtor-in-possession financing (“DIP financing”) is a tool that can be used in certain circumstances to help your business get back on track. You may find yourself facing challenges in your business, and cost-cutting measures, or a new business plan may not be enough to return your operations to profitability. Often, a formal restructuring process, supported by DIP financing, is what is needed to help your business turn around.
Using DIP financing to restructure your business
DIP financing may be the right solution if your business finds itself in a situation where you need to file for bankruptcy protection, be it Chapter 11 in the United States or, in Canada, filing of a notice of intention (“NOI”) under the Canadian Bankruptcy & Insolvency Act, or making a plan of arrangement under the Companies' Creditors Arrangement Act (commonly referred to as a CCAA filing). All these options allow you to avail yourself of debtor-in-possession financing.
A bankruptcy filing, which allows you to use DIP financing, can help you create some breathing room for your business. Filing for bankruptcy protection provides an environment where your creditors can no longer require you to make immediate payments against existing debts, giving you some time to come up with a new go-forward business plan. While under bankruptcy protection—in addition to accessing DIP financing—you can take steps to improve your business that aren’t available when operating normally. These include: exercising your right to rescind existing contracts, such as leases or uneconomical supply agreements; and settling debts with your suppliers. Using these tools in conjunction with well-structured debtor-in-possession financing will allow your business to emerge from your restructuring process stronger and better positioned to operate profitably.
During a restructuring process, you may need additional financing to assist you while operating under bankruptcy protection. This is where debtor-in-possession financing comes in. A court can grant a lender, such as Accord, a special priority charge over the assets of your company, allowing you to take advantage of debtor-in-possession financing during your restructuring process. A DIP financing facility can be critical to a successful restructuring. Putting debtor-in-procession financing in place for your business will help you meet your daily cash flow needs, as your suppliers will likely require payments on a COD basis. The additional liquidity provided by DIP financing will ensure that your business can continue to meet your commitments to customers throughout your restructuring process.
Bankruptcy protection and DIP financing – more common than you think
Using bankruptcy laws to reorganize your business and availing yourself of debtor-in-possession financing is certainly not an unheard-of strategy. Many very well-known companies have used debtor-in-possession financing to restructure their businesses. Here are a few companies that have restructured under bankruptcy protection using DIP financing:
- Air Canada
- BCBG Max Azria
- General Motors
- Marvel Entertainment Group
How DIP financing can work for you
Accord’s DIP financing is offered through asset-based loan facilities in amounts from $1 million to $20 million. Furthermore, when you emerge from bankruptcy protection with an accepted restructuring proposal, exit financing will be available by converting your DIP financing facility to a standard ABL operating line. Working with a partner, such as Accord, that can provide you with both a DIP financing facility and exit financing affords your business important stability at a critical time. Debtor-in-possession financing facilities have similar characteristics to standard ABL loans and can be used by companies in a variety of industries including:
Our team has decades of experience in providing DIP financing to companies just like yours. Through a restructuring process, where you file for bankruptcy protection and require debtor-in-possession financing, a stable and reliable source of funding is critical for you to successfully implement your plan. Furthermore, we recognize that there can be unpredictable moments during a DIP financing and can offer the experience and patience needed to help you while using debtor-in-possession financing.
Companies in many industries can avail themselves of debtor-in-possession financing and our DIP financing facilities can incorporate a variety of products, including retail inventory financing, supply chain financing, equipment financing, and asset-based loans supported by accounts receivable and inventory.
When your debtor-in-possession financing is structured with an asset-based loan facility, we will study your projections with you and appraise the value of your business’ assets with the objective of providing a DIP financing facility that will meet your needs and allow you to achieve the objectives as outlined in your turnaround plan. The flexibility of an asset-based loan facility is an excellent fit with debtor-in-possession financing, as DIP financing via an ABL facility requires limited covenants and will adjust in near real-time to the fluctuations of your inventory, receivables and other assets. If you are contemplating a bankruptcy filing or have already filed for bankruptcy and require debtor-in-possession financing, contact Accord or have your advisory team call us. We will put our experience to work for you and your DIP financing requirements.
Grow with us
By working with Accord for your DIP financing, you open the door to a range of financing options. As your company exits bankruptcy, we can continue to work with you and your team, converting your DIP financing to an ABL line of credit and offering financing programs to help you achieve your next milestone. Flexible options, which are available both as debtor-in-possession financing and as exit financing, include:
- Asset-based Lending
- Accounts Receivable Financing / Factoring
- Accounts Receivable Management
- Lender Finance
- Retail Inventory Financing
- Equipment Financing
- Supply Chain Finance
- Small Business Loans
Debtor-in-possession (DIP) financing FAQ
Debtor-in-possession financing, often referred to as DIP financing, is a form of financing that can be used by your business while you are operating under bankruptcy protection. A DIP financing facility provides access to additional liquidity that can be a key component of a restructuring plan.
DIP financing is put in place via a court order. The court approves the debtor-in-possession financing and provides the lender with a special DIP finance charge, or security interest, which ranks ahead of other lenders.
DIP financing provides the business with access to a new loan facility to help finance their operations while restructuring under bankruptcy protection.
When it comes to DIP financing, timing is critical.
If your company finds itself in a situation where you need to seek bankruptcy protection in order to restructure and DIP financing is needed, it will be critical to find a lender that has the ability to put a debtor-in-possession financing facility in place very quickly. At such a critical juncture for your business any delays in executing your turnaround plan can be serious.
Lenders with experience in DIP financing are familiar with this type of pressure and will be able to move quickly to put your DIP financing facility in place.
DIP Financing can be very beneficial to your company if you are ready to implement a turnaround and restructuring plan. Debtor-in-possession financing can provide you with access to additional cash at very critical juncture and at a moment when you may find yourself having to pay many of your suppliers COD.
Having debtor-in-possession financing in place can be the difference in a successful restructuring plan.
DIP financing may only be practical for larger loans. As DIP financing is a specialized form of financing, and not offered by all lenders, you may find the costs of a debtor-in-possession financing facility to be higher than that of traditional financing.
For example, in order to put a DIP financing facility in place, you will work with a specialized team of professionals with specific expertise in insolvency matters. Typically, a lender providing a DIP financing facility will take these additional costs into consideration and fund them as part of the DIP financing facility.
Debtor-in-possession financing can be a critical part of your company’s turnaround plan. Often, immediately following a Chapter 11 filing, your business can find itself in a cash crunch. Once the Chapter 11 filing is announced, suppliers may require COD payments and you may be faced with other critical cash payments.
Debtor-in-possession financing can be an excellent solution to this cash crunch, as it can provide you with immediate access to cash. Typically, your debtor-in-possession financing will be available to you throughout the entire time that you are operating under Chapter 11 protection.
DIP Financing rates vary from one transaction to the next. Typically, rates on debtor-in-possession financing facilities are based on:
- the type of asset available as collateral
- the level of risk
- the nature of your turnaround and restructuring plan.
Given the complexities associated with DIP Financing and the requirement of getting court approval for DIP financing you may expect to pay some additional setup fees related to putting debtor-in-possession financing in place.
Yes, debtor-in-possession financing is often used in the retail industry. Insolvency laws are well suited to helping retailers restructure their businesses and you often see retailers filing for Chapter 11 (or CCAA in Canada) in conjunction with the use of DIP financing. DIP Financing used during an insolvency filing has helped many retailers successfully restructure their businesses.
DIP financing is one of the many financing vehicles specifically tailored for the retail industry.
For example, debtor-in-possession financing may be helpful to you if your business has filed for bankruptcy protection and your suppliers have a considerable amount of product ready to deliver but are requiring COD payments. Using DIP financing, you could pay your short-term operating expenses and make the COD payments to your suppliers, purchasing this inventory that you can quickly ship to your customers and convert to accounts receivable.
DIP financing provides the short-term liquidity to get your supply chain flowing again, ensuring a consistent revenue stream for your business while operating under bankruptcy protection.
You are best served by a lender with extensive experience providing debtor-in-possession financing. DIP financing can be complex, and DIP financing facilities often need to setup quickly, so it’s critical that you work with a team that is experienced with DIP financing.
With 40 years of experience providing DIP financing and many members of our senior management team involved in the Turnaround Management Association, Accord has the experience and expertise needed to quickly put a DIP financing facility in place. Call us for more information on getting your DIP financing facility: +1-844-932-9940 (Canada) / +1-844-725-4225 (US)
Although debtor-in-possession financing is sometimes offered by banks and traditional lenders, the primary sources for DIP Financing in Canada are asset-based and other non-traditional lenders.
Accord, one of Canada’s leading independent asset-based lenders, has extensive experience and expertise offering debtor-in-possession financing and exit financing to your business during and after you are operating under bankruptcy protection. Call us now to learn about a DIP financing facility for your business: +1-844-932-9940 (Canada)
Although debtor-in-possession financing is offered by various types of lenders, including banks and other traditional lenders, in the US marketplace the main source of DIP Financing for smaller and midmarket companies are asset-based and other non-traditional lenders.
As one of North America’s leading independent asset-based lenders, Accord has been offering debtor-in-possession financing and exit financing for decades to businesses like yours throughout the Chapter 11 filing process. Call us to learn how you can get a DIP financing facility for your unique needs: +1-844-725-4225 (US)
When your business emerges from bankruptcy protection, Accord can provide exit financing by converting your DIP financing facility into a standard asset-based loan facility. By working with a lender such as Accord, that offers both DIP financing and exit financing, you have access to an important amount of continuity for your business.
If your DIP financing provider doesn’t offer exit financing, you will have to go through an entire re-financing process to replace your debtor-in-possession financing with a new lender when you emerge from bankruptcy protection. So make the right choice from the start!