Factoring Structures – DIP (Debtor-in-Possession) Invoice Factoring

Filing for bankruptcy should always be a strategic decision, not a last-minute reaction. One of the most important parts of that strategy is planning for post-petition funding – because without a clear source of working capital, even the best reorganization plan can fall apart. That’s where DIP factoring comes in.

Debtor-in-Possession (DIP) factoring is a specialized niche within the factoring world. It’s designed for companies that are either preparing to file or are already in Chapter 11 bankruptcy but are still operating and generating B2B invoices.

What many business owners don’t realize is that getting factoring while in bankruptcy is absolutely possible. In fact, it can be a lifeline – providing immediate cash flow to cover payroll, pay critical vendors, and stabilize day-to-day operations. Because of the added risk and court oversight, not every factoring company offers DIP facilities. Those that do, however, understand how to navigate the process and structure funding that satisfies both the business and the court.

Some experienced factors can move very quickly – often structuring a DIP facility within 4–7 business days. When coordinated early (sometimes even pre-packaged), the facility can be incorporated directly into the bankruptcy filing itself.

When knowledge, speed, and capacity matter, having the right funding partner makes all the difference. The factor’s legal counsel will typically appear alongside your attorney during first-day motions, presenting and arguing for DIP approval before the bankruptcy court. Choosing a ready-to-fund, experienced partner at this stage helps ensure operations stay stable and that your reorganization plan has the best chance to succeed.

Businesses that are considering – or have already filed – Chapter 11 can be great candidates for DIP factoring if they show financial discipline and a clear path forward. Factors typically look for companies that demonstrate:

• Annual sales over $2 million
• A diversified customer base (so no single client dominates revenue)
• Accurate and reliable financial statements
• The ability to generate positive cash flow shortly after filing

When these elements are in place, DIP factoring provides the liquidity and confidence needed to move through reorganization – and emerge stronger on the other side.