Debtor in Possession (DIP) Financing

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Debtor in Possession, or DIP Financing is a kind of debt that is more senior than all other debt - meaning if the lender doesn't have the funds to pay everyone back, the DIP loan is paid back first.

DIP financing is used by companies that are entering bankruptcy to continue operations (ie, to pay employees, cover legal costs, etc.) as they complete the bankruptcy process.

The financing is more senior than other debt because otherwise banks will not otherwise lend to a bankrupt company - ie one that has acknowledged it does not have the funds to pay back all its creditors.

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