There may come a time when you may experience financial struggles as you grow a company—it’s an inevitable part of the business. Regardless of whether it’s due to the ever-changing preferences of customers or the unavoidable fluctuation of prices, financial loss and sales drops are common, especially in an economy that is not as secure as it was before.
In such a case, it remains your responsibility to make sure that things stay afloat. Yes, it is hard, but there will always be alternatives and solutions that one may employ to get the business out of its current slump. One of the many solutions that may be presented to you is DIP financing.
Debtor-in-possession (DIP) is a type of lending given out by banks and other lenders. They will finance the credit needs of a debtor-in-possession to help them recover from financial blows.
While any company may go for this method, it is essential to remember that the most qualified for this lending acquired protection under the Bankruptcy Code. In any case, we have listed a couple of helpful pieces of information below for your reference.
1. DIP Financing Can Help Restore the Trust of Customers and Clients
The thing about DIP financing is that it has a considerable tendency to gain back the trust and attention of all your customers and clients because you are now given the appropriate amounts to jump back to work and get your productivity in place.
Think of it as an excellent way to restart from scratch and give your loyal consumers all the items and services they’ll need. DIP financing is your only hope when planning a comeback.
2. The Interest Rates of DIP Financing Can Vary
The interest rates can go as high as 12% to 18%. Nonetheless, that is still a fair price to pay, compared to the other lenders whose numbers can go beyond 20%. Take note of this if you plan to budget your assets and numbers as you try to recover from your losses.
This isn’t so much about the money you’ll use while trying to gain momentum, but this is more of the debt you will have to pay once you have finally recovered. List down the percentages and be ready to pay them off once you have finally gained your footing.
3. DIP Financing Can Be Obtained from an Existing Lender
Believe it or not, DIP financing can be acquired from an existing lender. They are usually offered in the form of a DIP loan. However, you must note that the lender may not be able to increase their loan if they have already filed for a Chapter 11 bankruptcy.
This particular technicality may limit the amount that you are allowed to get, but if you think that this wouldn’t be much of a detrimental cost to you, then, by all means, try to find DIP financing from an existing financier.
DIP financing is a much better option than filing for a Chapter 11 bankruptcy right away. Aside from the fact that they will be able to restore the trust of your customers, they will also be able to give you a clear idea of the interest rates that you would have to pay off after and the possibility of getting them from an existing lender.
Be wise about your decisions and sort out all your financial options. DIP financing might be your only chance of bouncing your company back from its current slump.
If you are looking for a trusted lender that offers DIP financing, look no further than Porter Capital. We provide working capital solutions to businesses all over the country in a variety of industries. Contact us today—let’s discuss financing options for you!