A payment-in-kind bond refers to a type of bond that pays interest in additional bonds rather than cash. The bond issuer incurs additional debt to create the new bonds. Payment-in-kind promissory notes work the same way.

The majority of investors who invest in PIC bonds are usually institutional investors and hedge funds that are looking for a high return where cash flow is of secondary importance. PIC bonds usually pay higher interest rates than standard issue bonds.

Payment-in-kind promissory notes are often accepted in connection with the sale of a business. The seller generally obtains a higher price, while the buyer is not burdened by payments for a period of time, providing the buyer with extra cash to expand the business.

An equity kicker is a financial incentive whereby a lender provides credit at a lower than market interest rate in exchange for an equity position in the borrower's company. The equity kicker may take the form of stock or warrants.

Business Sales - Payment Structures and Payment Options

Warrants and Stock Options

Revenue-Based Financing - Royalties

Additional Consideration - Sale of Business