Regardless, under such circumstances a company considering bankruptcy should carefully weigh the decision of which lender to bring in for bankruptcy financing. A company that has an unsecured working capital line may have made a negative pledge agreement whereby it promises not to secure certain assets such as inventory or receivables to any other lenders. However, once the company files bankruptcy it is protected from lawsuits brought by its prior creditors, so a negative pledge would no longer be enforceable by a prepetition lender. In securing bankruptcy financing, a company can generally secure whatever assets are unencumbered. Expect a lender to make two separate credit evaluations-one to finance your business on entering bankruptcy and another to finance it as it emerges.
Bankruptcy is expensive.
There are significant costs which may include legal fees or retainers, the expenses of court-appointed committees and professionals, court fees, a lender's due diligence and loan fees, investment bank fees if new stock is issued, and development of a plan to emerge from bankruptcy. While circumstances may allow trade suppliers to continue shipping goods once bankruptcy is filed, some customers may turn to a competitor who is not in bankruptcy. The process disrupts the normal conduct of business. Opportunity costs, which may be difficult to measure, are very much an element of bankruptcy. Both involve planning the POR before filing .