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.

RELATED TERMS
  1. Term Loan

    A loan from a bank for a specific amount that has a specified ...
  2. Commercial Loan

    A debt-based funding arrangement that a business can set up with ...
  3. Call Loan

    A loan provided to a brokerage firm and used to finance margin ...
  4. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
  5. Renegotiated Loan

    The result of an agreement between a borrower and a lender to ...
  6. Loan Officer

    Representatives of banks, credit unions and other financial institutions ...
Related Articles
  1. Personal Finance

    What Does a Creditor Do?

    A creditor is a person or entity that loans money or provides goods or services to another entity with the expectation of being paid back in the future.
  2. Insights

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  3. Personal Finance

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
  4. Retirement

    Business Owners: A Guide To Qualified Retirement Plan Loans

    Thinking of adding a loan feature to your company's plan? Here's what you need to know.
  5. Personal Finance

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  6. Managing Wealth

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  7. Personal Finance

    All About Government Loans

    There are many reasons to seek a government loan rather than one from a private lender. Government loans typically have low interest rates and offer fixed or subsidized options, as well as deferred ...
  8. Personal Finance

    Getting Government Loans For Your Small Business

    Would a government loan provide a more cost-effective way to finance your business? See whether your company qualifies for a government loan.
  9. Personal Finance

    8 Top Alternatives to Car Title Loans

    Before you sign up for a car title loan, investigate these 8 alternate strategies.
RELATED FAQS
  1. What's the Differences Between Chapter 7 and Chapter 11?

    Chapter 7 bankruptcy is sometimes called liquidation bankruptcy, while Chapter 11 bankruptcy is called rehabilitation bankruptcy. Read Answer >>
Hot Definitions
  1. Nostro Account

    A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts ...
  2. Retirement Planning

    Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve ...
  3. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  4. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
  5. Redemption

    The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units ...
  6. Solvency

    The ability of a company to meet its long-term financial obligations. Solvency is essential to staying in business, but a ...
Trading Center