PIK Loans & PIK toggle. Business Loans without Interest. Payment in Kind. NO Interest or regular monthly payments from borrower till maturity or end.
PIK Loans – Business Loans without Interest. Did you know that there are Business Loans available without any interest? In this video tutorial, we discuss how a company can raise “Payment in Kind” business loans, under what special circumstances, PIK Toggle & other issues.
Yes, it’s True! There are some business loans available without any interest. These are called as “Payment in Kind” Loans or simply called as PIK Loans. They are not available under normal circumstances for every business owner or business entrepreneur. PIK Loans are available for business owners under very special circumstances under very special arrangements.
Sometimes businesses will not be able generate enough cash regularly on a daily basis or even on a monthly basis. Since enough cash is not generated it becomes very difficult to service the business loans & pay interests to the lenders. Instead of paying regular monthly interests, they offer their services instead. The lenders can avail the services offered by the borrowers instead of interests. Normally PIK Loans facilities are available with private investors, private financiers & financial institutions.
Some other businesses need to inject some big amounts to build their balance sheets to secure really big loans from banks & financial institutions. By taking a PIK loan from private investors or from financial institutions, the companies can add to the working capital & build up a better balance sheet which in turn gives them a good chance to secure other big loans. Some companies may be planning for really big business expansion or even planning to go public & take the IPO route Initial public offering to raise really big capital for their business. Only under these above mentioned circumstances, the companies will be able to avail “Payment in Kind” Loans or the PIK Loans.
The main feature of PIK loans is that, there is no cash flow happening from borrower to lender. PIK Loans will have NO Interest or any regular payments until maturity. The PIK Loan enables the debtor to borrow without having the burden of a cash repayment of interest until the Loan term ends. This is attractive to companies during the growth phase of Business who do not want to spend their available cash towards payment of interests. Find out More!
