Debtor-in-possession lending and financing can be a complicated process, but it allows debtors to retain physical assets while filing for protection under the Federal Bankruptcy Code. A DIP loan is usually short term, and provides a low loan to value ratio. The purpose of DIP loans are to give a debtor the necessary capital to choose a reorganization plan or sell an asset.

A DIP lender must know the Federal Bankruptcy Code and have a solid background in accounting and lending practices. To be a debtor-in-possession lender, you must train to work for financial companies and learn the skills needed to determine viable risks. You can find many debtor-in-possession (DIP) financing education and training opportunities through:

1. Programs in accounting and finance at a college or university.

2. Online training that teaches skill sets specifically for debtor-in-possession lenders.

3. Seminars that allow networking and continuing educational opportunities.

Action Steps
The best contacts and resources to help you get it done

Get a degree in financing to work with DIP lenders

Anyone working for an institution that loans money to consumers and debtors will need a strong background in finance. You can find many finance programs through colleges, universities and online schools. There are also many programs available, including those that provide you with an associate's, bachelor's or master's degree.

I recommend: Wharton University of Pennsylvania provides a comprehensive degree program in finance. Courses include basic and advanced finance topics that cover bankruptcy and businesses restructuring. Western Governors University provides a bachelor of science program in finance that can be completed online.

Take online courses to learn more about debtor-in-possession loans

Because debtor-in-possession loans mix finance with law, specific skills for determining risk and following federal codes is necessary. There are many resources online where you can find training courses for debtor-in-possession loans, how to assess risk for these loans, and what they can do for businesses.

I recommend: Law Seminars International offers an intensive home study course based on its seminar, "Workouts & Remedies in Real Estate," covers issues in real estate transactions, including DIP loans. The class is suitable for real estate agents, buyers, lenders and lawyers. The International Factoring Association provides a course called "Accounting Executive and Loan Officer Training." This course covers many topics, including debtor-in-possession lending, collections services and management strategies.

Attend seminars to learn more about debtor-in-possession loan practices

Seminars are another great way to learn about debtor-in-possession loans. Seminars are short but intensive training opportunities that are geared to who those already work in the field, but novices can also benefit by attending.

I recommend: The Association of Insolvency & Restructuring Advisors provides many events throughout the years that cover financial topics including DIP lending. FindaSeminar.com has many listings for seminars related to DIP lending, including a seminar on bankruptcy law.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  An internship with a financial company that works with debtor-in-possession loan practices is another educational opportunity for those in the finance industry.

Debtor-in-possession (DIP) financing is a type of financing that companies with financial problems and going through Chapter 11 bankruptcy receive. It allows companies a fresh start financially, but still applies some restrictions that each company must follow.

Many financial institutions compete with each other to provide debtor-in-possession loans to bankrupt companies, so if your company is on the verge of bankruptcy, but you would still like to operate, it is possible to obtain a loan to pay for daily costs.

A company referred seeking a debtor-in-possession loan typically has the following aspects after filing bankruptcy:

1. It is still managed by the same people as before the bankruptcy.

2. The company nearly always needs an immediate loan after filing for bankruptcy just to cover payroll and other ongoing business costs.

3. The company is always held to strict rules after receiving a debtor-in-possession loan, protecting the debtor-in-possession lender.

Action Steps
The best contacts and resources to help you get it done

Know if you qualify for debtor-in-possession (DIP) financing

If you are interested in getting a DIP loan, make sure you first know the rules you must follow and the steps you need to take to get started, or if you are even qualified to get a loan of this type.

I recommend: GE Commercial Finance explains why it offers DIP financing and to whom they offer it. The Department of Justice United States Trustees Program website also explains DIP Financing and guidelines that the candidate for such financing needs to know.

Find a good lawyer who has worked with debtor-in-possession financing

Hire a lawyer who is well-versed in debtor-in-possession lending to represent your company. This will make the process run smoothly, especially if this is your first loan since bankruptcy. Most lawyers can give some advice regarding Debtor-in-Possession Financing, even if you decide not to use that particular lawyer.

I recommend: Sheppard Mullin Richter & Hampton LLP provides details about the options when entering into DIP Financing. Robert J. Haeger also assists those dealing with bankruptcy issues.

Find an experienced DIP lender

It is best to work with a company that specializes in debtor-in-possession lending. Once you have outstanding legal backing and a helpful lender, the experience will be a positive one.

I recommend: Commercial Capital LLC offers DIP lending to businesses with at $500,000 in annual sales. CapitalSource offers DIP loans as one of its financial services.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  If you are not sure where to get started, talk to your local bank or credit union. They will typically provide you with free counsel before you spend money on a lawyer only to find that you do not qualify for a DIP loan.