Raising cash in Chapter 11 without new debt

A DIP loan isn't the only way to fund a Chapter 11, and for many smaller debtors it isn't available on tolerable terms. Here are the tools debtors use to find cash without borrowing more, roughly in the order they're usually reached for.

General information, not legal or financial advice.

1. Use cash collateral

If your cash and receivables are subject to a lender's lien, they're "cash collateral," and you can use them with the lender's consent or court authorization after the lender is adequately protected (§ 363(c)(2), (e)). Most cases start with an interim cash-collateral order on the first day.

What it does: lets you spend money you already have. What it doesn't: create new money.

2. Collect what you're owed

Receivables are often the fastest real cash. Focus collections, and look at claims the estate may have against others, though litigation is slow.

3. Cut the burn

Section 365 lets a debtor reject burdensome executory contracts and unexpired leases, with court approval. Rejecting an above-market lease or an unused software contract cuts burn, which extends runway as surely as new cash does. Rejection creates a claim for the counterparty, so counsel will weigh the trade-off.

4. Sell non-core assets

Surplus equipment, idle real estate, a non-core product line, or unused intellectual property can be sold under § 363(b) after notice and a hearing. Liens often attach to proceeds.

5. License your operational data

This is the newest tool on the list, and the one most debtors don't know about. AI developers license de-identified records of real business work: email, chat, documents, CRM and ERP history. For a debtor:

• No new debt and no equity given up.
• The business keeps its data and keeps operating, under a typical non-exclusive license.
• Value from an asset that's rarely on anyone's collateral analysis, although lenders with liens on general intangibles may have a claim to the proceeds.

It still needs a § 363(b) motion, privacy screening and a fair market process. Our illustrative range is up to $50K to $1M+; no price is guaranteed.

6. Customer or vendor support

Key customers sometimes prepay or accelerate payments to keep a critical supplier alive; vendors sometimes extend terms. These arrangements may need court approval if outside the ordinary course.

7. Plan funding from new investors

An investor can fund the plan in exchange for equity. This takes longer and dilutes or replaces the owners. In Subchapter V, § 1191 lets owners keep equity under certain conditions without new value, which changes the math.

Comparing the tools

Building a runway plan

A practical sequence for a cash-tight debtor:

1. Interim cash-collateral order on day one.
2. Rejection motions for the most expensive unused contracts in the first weeks.
3. A confidential data valuation in week one; marketing in weeks one to three.
4. A 363 motion for the data license and any other non-core assets.
5. Proceeds into the budget as the orders permit.

Use the runway estimate to translate an illustrative offer into weeks of operations after liens and costs.

Talk to your lender first

Every tool above except collections touches the lender's interests. A lender that understands the plan will usually support steps that bring cash in without impairing its collateral. A surprised lender objects.

When none of this is enough

If the gap is too large, these tools may still buy time to run a sale of the business or negotiate a plan. Sometimes the right outcome is an orderly sale or conversion, and an honest early read on value helps everyone make that call.

This guide is general information, not legal, tax or financial advice, and reading it does not create an attorney-client relationship. Bankruptcy outcomes depend on the facts, the court and the parties; nothing here promises price, timing or court approval. Talk to your bankruptcy counsel about your case.