DIP stands for Debtor In Possession. Unfortunately, some companies that experience financial difficulties find they may have no other choice but to proceed with a bankruptcy. Some of these companies may find themselves in this situation for unusual reasons and the underlying business may actually be healthy and productive. However when they are in this situation, their financing options are slim or non-existent. This situation may be evident in a Chapter 11 bankruptcy in which a reorganization and restructuring may be more rewarding than simply liquidating the company. Under the jurisdiction of the bankruptcy court, DIP financing may be secured and allow the business a greater chance of repaying its debts and even exiting the bankruptcy. Outside of a bankruptcy, it is not a financing option.
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