Priming Loan


DEFINITION of 'Priming Loan'

A form of debtor-in-possession, or DIP financing, whereby the debtor company is able to obtain a loan to assist in specific areas of the business while it is in Chapter 11 proceedings. A priming loan must satisfy requirements for the existing creditors, and language in the loan contract may call for money to be automatically set aside by the company to pay interest and outstanding debt to existing creditors. Funds from a priming loan can usually only be used to maintain the core business, as in repairs, supply chain management and payroll.

BREAKING DOWN 'Priming Loan'

A priming loan can be the break a company needs to get through a Chapter 11 healthy enough to make a fresh start. Existing lenders usually will have a say in whether or not a company can get a priming loan, as such a loan will have priority repayment terms over any existing debts of the company.

  1. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  2. Debt Financing

    When a firm raises money for working capital or capital expenditures ...
  3. Debtor In Possession - DIP

    An individual or corporation that has filed for Chapter 11 bankruptcy ...
  4. Discharge In Bankruptcy

    A permanent order that releases the debtor from personal liability ...
  5. Prepackaged Bankruptcy

    A plan for financial reorganization that a company prepares in ...
  6. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
Related Articles
  1. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  2. Bonds & Fixed Income

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  3. Entrepreneurship

    10 Ways to Be a Successful Entrepreneur

    Are you hoping to launch your own business and work for yourself? If so, here are the top 10 tips for entrepreneurs.
  4. Options & Futures

    Haunting Wall Street: The Halloween Terminology Of Investing

    Beware of zombies and Jekyll and Hyde companies! Read about the spooky terms circulating Wall Street.
  5. Entrepreneurship

    5 Biggest Challenges Facing Your Small Business

    Would-be business owners must consider the unique challenges that lie ahead when they start a small company. Following are five they are likely to face.
  6. Investing

    5 Iconic Airlines That No Longer Exist

    Learn the stories behind the disappearance of a number of formerly iconic airlines that no longer exist following financial difficulties or other problems.
  7. Investing

    5 Fortune 500 Companies That No Longer Exist

    Discover where the concept for the Fortune 500 list came from and learn about companies previously on the list that no longer exist.
  8. Investing Basics

    7 Iconic Brands That No Longer Exist

    Understand the value of branding and what makes good brands great. Learn about seven iconic brands that failed and no longer exist.
  9. Investing Basics

    The Biggest IPO Flops

    Even with the uncertainties of IPOs, companies will keep issuing them in efforts to grow their enterprises, and some will end in disaster.
  10. Investing News

    Will Arch Coal file for Bankruptcy?

    In the last four years, Arch Coal Inc. (ACI) has been facing headwinds from lower price of coal amid global oversupply. The shares of ACI have lost nearly 99% of their value this year.
  1. What happens to a company's stocks and bonds when it declares chapter 11 bankruptcy ...

    Filing for chapter 11 bankruptcy protection simply means that a company is on the verge of bankruptcy, but believes that ... Read Full Answer >>
  2. What are the differences between chapter 7 and chapter 11 bankruptcy?

    Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past ... Read Full Answer >>
  3. Does working capital include stock?

    A certain portion of a company’s working capital is generally composed of earnings; however, current short-term assets that ... Read Full Answer >>
  4. What are some alternatives a company can attempt prior to resorting to liquidation?

    Some alternatives a company's owners can attempt prior to resorting to liquidation are selling the company, raising money ... Read Full Answer >>
  5. Under what circumstances might a company decide to liquidate?

    There are many reasons a company may decide to liquidate. A smaller company may decide to liquidate if one of the main owners ... Read Full Answer >>
  6. What happens to the shares of a company that has been liquidated?

    The fate of a liquidating company’s shares depends on the type of liquidation the company is undergoing. The most common ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  2. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  3. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  4. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  5. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
  6. Discount Bond

    A bond that is issued for less than its par (or face) value, or a bond currently trading for less than its par value in the ...
Trading Center