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DIP Factoring vs. DIP Financing

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DIP Factoring vs. DIP Financing: What’s the Difference?

DIP Factoring vs DIP Financing have differences. When a business files for Chapter 11 bankruptcy, securing reliable funding becomes critical to keep operations running. That’s where Debtor-in-Possession (DIP) Financing and DIP Factoring come into play. Both options provide much-needed capital during restructuring, but they work in different ways. Understanding the differences can help businesses choose the right solution—and partnering with the right company ensures a smooth process.

What Is DIP Financing?

DIP Financing is a loan that allows a business under bankruptcy protection to access working capital. These loans are typically approved by the bankruptcy court and secured by the company’s assets. Lenders take on higher risk, so terms can be strict, and approval requires court oversight. While DIP Financing can provide large sums, it can also lead to more debt at a time when a business is already financially strained.

Key Features of DIP Financing:

  • Court-approved loan during bankruptcy.

  • Based on company assets and collateral.

  • Can involve strict lender requirements.

  • Adds debt to the company’s balance sheet.

What Is DIP Factoring?

DIP Factoring, on the other hand, provides funding by converting outstanding accounts receivable into immediate cash. Instead of borrowing more money, businesses sell their unpaid invoices to a factoring company at a discount. This gives them fast access to capital without taking on new debt, making it an attractive alternative for companies already under financial pressure.

Key Features of DIP Factoring:

  • Immediate funding based on outstanding invoices.

  • No new debt—businesses sell receivables for cash.

  • Provides consistent cash flow during restructuring.

  • Often faster and easier to secure than DIP loans.

DIP Factoring vs. DIP Financing: Which Is Better?

Both solutions can help businesses in bankruptcy, but DIP Factoring offers unique advantages:

  • Speed: Cash is available almost immediately.

  • Flexibility: Funding grows as receivables grow.

  • Less Risk: No additional debt burden.

For many companies, DIP Factoring is the more sustainable option, especially when liquidity is urgently needed.

Why Choose First Capital?

At First Capital, we specialize in helping businesses across Texas and nationwide secure the funding they need during difficult financial times. Whether through DIP Factoring or guidance on DIP Financing, we tailor solutions to fit each client’s unique situation.

With decades of experience, a proven track record, and nationwide reach, First Capital is the trusted partner businesses rely on to keep operations running—even during bankruptcy.

Benefits of Partnering with First Capital:

  • Fast approvals and funding.

  • Customized solutions for DIP Factoring.

  • Nationwide service with expertise in Texas markets.

  • Dedicated team with experience in complex financial situations.

If your company is facing bankruptcy and needs reliable funding, First Capital is here to help. Contact us today to explore your options and secure the financial lifeline your business needs.