Key facts at a glance
- DIP (debtor-in-possession) financing is a court-approved loan to a company restructuring under the CCAA (s. 11.2) or making a proposal under the BIA (s. 50.6, “interim financing”). The court grants the lender a priority charge over the company’s assets, usually ahead of existing secured lenders.
- Who it is for: businesses with going-concern value and hard assets – real estate, equipment, receivables, inventory – that need 3-12 months of liquidity to finish a project, complete a sale, or implement a plan. CCAA requires more than $5 million of debt; BIA proposals have no minimum.
- Typical terms: sized to a court-approved cash-flow forecast, interest-only, 6-12 months, lender fee plus commitment fee, secured by the DIP charge; funded by specialty private credit funds and some banks, arranged in 2-4 weeks alongside the filing.
- Alternatives that avoid a filing: forbearance, refinancing the senior loan with a private or asset-based lender, a sale-leaseback, equipment or receivable financing, or an orderly sale of non-core assets – see asset-based lending.
- CRA arrears (HST, source deductions) are the trigger in many Ontario files; deemed trusts rank ahead of most security, so lenders want them cleared or provided for in the plan.
- Gurpinder Gaheer, BA Hons, MBA – Mortgage Broker #M22004577, CreditReboot Mortgages, FSRA Brokerage #13163; Real Estate Broker, Right at Home Realty, Brokerage.
Quick answer: If your company is in default, facing a receivership application, or has filed a Notice of Intention to make a proposal or a CCAA application, the money that keeps the doors open and the project moving is called DIP financing (under the CCAA) or interim financing (under a BIA proposal). It is approved by the court, secured by a priority charge, and sized to a weekly cash-flow forecast. Many Ontario companies that end up in receivership could have restructured with the right interim capital arranged early. This page explains how DIP financing works, who qualifies, what it costs, and the alternatives I look at first.
What DIP and interim financing are
When a company files under the Companies’ Creditors Arrangement Act (CCAA) or files a Notice of Intention (NOI) to make a proposal under the Bankruptcy and Insolvency Act (BIA), existing creditors are stayed – they cannot enforce. But the company still has to pay employees, suppliers, insurance and the trades on a half-built building. Existing lenders rarely advance more. So the court may approve new money:
- CCAA s. 11.2 – interim (DIP) financing. The court may order a charge in favour of the DIP lender ranking ahead of secured creditors if it is satisfied the financing is necessary, the amount and terms are reasonable, and the secured creditors are not materially prejudiced. Lenders with existing security are given notice and can object.
- BIA s. 50.6 – interim financing in a proposal. The same tool for Division I proposals: a court-approved charge for new money during the proposal period (30 days, extendable to 6 months).
- Receiver’s borrowings. In a receivership the receiver itself borrows on receiver’s certificates under the appointment order – not DIP in the technical sense, but the same idea: priority money to preserve and sell assets.
Who qualifies for DIP financing in Ontario
- Going-concern value. The business, or the project, is worth more alive than liquidated: a rental building 80% built, a manufacturer with contracts, a hotel with bookings, a plaza with tenants.
- Hard collateral. Real estate, equipment, inventory and receivables that an appraiser can value and a DIP lender can rank ahead on. Pure service businesses rarely raise DIP money.
- A credible plan and a monitor or proposal trustee. The court looks at the cash-flow forecast and the monitor’s or trustee’s report; the DIP lender looks at the exit – a sale, a refinancing, or a plan of arrangement that repays the DIP in full.
- Size. Practical DIP facilities start around $1 million and run to $50 million+; smaller companies are better served by a private refinance or ABL facility without a court process.
What it costs and how it is structured
- Facility sized to the court-approved cash-flow forecast, drawn against a weekly budget with variance reporting.
- Interest-only, typically 6-12 months, priced above conventional commercial lending to reflect the risk and the speed; a commitment fee and a lender fee at closing; legal costs of the lender paid by the borrower.
- Secured by the court-ordered DIP charge, which ranks where the order says it ranks – usually ahead of existing secured creditors, behind the administration charge for the monitor and counsel.
- Repaid from the sale or refinancing that the restructuring is designed to produce. The DIP lender often has the first right to provide the exit financing.
Alternatives I look at before a filing
A court process costs hundreds of thousands of dollars in professional fees and tells every customer and supplier that you are insolvent. For many Ontario owners the better route is capital that avoids the filing:
- Forbearance with the existing lender – a standstill in exchange for a paydown, new reporting, a sale deadline or a guarantee.
- Refinancing the senior debt with a private or alternative commercial lender at 55-65% loan-to-value, interest-only, 12-24 months – commercial mortgage financing and private lending.
- Asset-based lending on receivables, inventory and equipment to replace a bank line that was cut – ABL in Canada.
- Sale-leaseback of owned real estate or equipment to raise cash and keep operating.
- Bridge financing to a committed sale or take-out – bridge financing in Ontario.
- Orderly sale of non-core assets through the brokerage side, before a receiver does it for you.
- CRA arrangements. Payment arrangements or a refinance that clears source-deduction and HST arrears, which otherwise rank ahead of every lender and poison any financing.
The process, step by step
- Same-day review of the demand, the s. 244 notice, the loan documents, the cash position and the asset values.
- Decision within days: forbearance / refinance / ABL / sale (no filing), or NOI / CCAA with interim or DIP financing. This decision is made with your insolvency counsel and a proposal trustee or monitor; I bring the capital side.
- Term sheet from a DIP or private lender within 1-2 weeks, built on a 13-week cash-flow forecast.
- Court approval of the charge (CCAA or BIA) alongside the initial order or within the proposal period; funding follows the order.
- Weekly reporting against the budget; exit through sale, refinancing or a plan, with the DIP repaid in full.
Why this matters in Ontario in 2026
Ontario insolvencies are at a 17-year high and the restructurings that make the news – stalled condo towers, office complexes, hotel portfolios, trucking and construction companies squeezed by tariffs and rates – have one thing in common: the capital question was asked after the receiver was appointed rather than when the demand letter arrived. The 10-day BIA notice and the 21-day mortgage non-renewal notice are the moments to call.
Facing a demand or planning a restructuring? Get the capital options in writing.
Frequently asked questions
What is DIP financing?
Debtor-in-possession financing is a new loan to a company that is restructuring under court protection – the CCAA in Canada, or a BIA proposal where it is called interim financing. The court approves the loan and grants the lender a priority charge over the company’s assets so that it can advance money that existing lenders will not.
Is DIP financing available under the BIA, or only the CCAA?
Both. Section 11.2 of the CCAA and section 50.6 of the BIA let the court approve interim financing with a priority charge. CCAA is for companies with more than $5 million in debt; BIA Division I proposals are used by smaller companies.
How much does DIP financing cost?
More than a bank loan and less than losing the business: an interest rate reflecting the risk and speed, a commitment or lender fee, and the lender’s legal costs, on a 6-12 month interest-only term. The exact pricing depends on the collateral, the cash-flow forecast and the exit, and is disclosed in the term sheet that goes to the court.
Can DIP financing rank ahead of my bank?
Yes, if the court orders it. The existing secured lenders are notified and can object; the court weighs whether the financing is necessary and whether they are materially prejudiced. In practice a well-sized DIP facility that preserves the value the bank is relying on is usually approved.
How fast can interim financing be arranged?
A term sheet in 1-2 weeks and funding on court approval, often within 3-4 weeks of the first call when the cash-flow forecast, appraisals and security review move in parallel with the filing.
What if my company is too small for CCAA?
Most Ontario files are. A BIA proposal with interim financing, or – more often – a refinance, asset-based facility, sale-leaseback or forbearance that avoids a filing altogether, is the right tool. The analysis is the same; the capital source is different.
Do CRA arrears stop me from getting financing?
They complicate it. Unremitted source deductions and HST create deemed trusts that rank ahead of most lenders, so any lender will require them cleared, provided for in the plan, or covered by a payment arrangement. Refinancing to clear CRA arrears is one of the most common reasons Ontario business owners call.