What is a PIK dividend?
PIK Dividend means a dividend accrued on each share of Series A-1 Preferred Stock and paid in shares (including fractional shares) of Series A-1 Preferred Stock.
How does a PIK work?
PIK notes allow borrowers to defer interest payments until the debt matures. PIK interest is not paid in cash but gets accrued each year on the loan balance. The accrued interest is paid at the end of the loan term along with the principal.
What does Pik mean?
Payment-in-kind
Payment-in-kind (PIK) is the use of a good or service as payment or compensation instead of cash. The phrase “payment-in-kind” also applies to the accepting of cash alternatives for work or services.
How is Pik calculated?
To calculate the PIK interest, the formula consists of the PIK interest rate being multiplied by the beginning balance of the applicable debt security or preferred equity.
Do you pay interest on PIK interest?
PIK, or payment-in-kind, interest is the option to pay interest on debt instruments and preferred securities in kind, instead of in cash. PIK interest has been designed for borrowers who wish to avoid making cash outlays during the growth phase of their business.
What is a PIK fee?
PIK Fees means the payment-in-kind of the Undrawn Commitment Fee by increasing the outstanding principal amount of the Loans.
Can tax be paid in kind?
Tax in kind or tax-in-kind usually refers to any taxation that is paid in kind, that is with goods or services rather than money, including: fisc, in the Frankish kingdoms of the Medieval period.
How is PIK interest taxed?
Unlike most business loans, though, the interest on a PIK loan isn’t actually paid in cash during the loan term. Instead, the borrower supplies the interest in non-cash form. Even so, as long as the loan is used for business purposes, the value of PIK interest should be tax-deductible.
What is OID in debt?
An original issue discount (OID) is the discount in price from a bond’s face value at the time a bond or other debt instrument is first issued. Bonds can be issued at a price lower than their face value—known as a discount.
WHO issues mezzanine debt?
Mezzanine debt is when a hybrid debt issue is subordinate to another debt issue from the same issuer. Mezzanine debt bridges the gap between debt and equity financing and is one of the highest-risk forms of debt—being subordinate to pure debt but senior to pure equity.
What is a Mezz Lender?
Mezzanine financing is a hybrid of debt and equity financing that gives the lender the right to convert the debt to an equity interest in the company in case of default, generally, after venture capital companies and other senior lenders are paid. In terms of risk, it exists between senior debt and equity.
Are mezzanine loans secured?
A mezzanine loan is a type of subordinate loan that is indirectly, rather than directly, secured by real property.
What is Bridge capital?
Bridge capital is temporary funding that helps a business cover its costs until it can get permanent capital from equity investors or debt lenders. The repayment terms for bridge capital vary, but usually payment is made in full when the company receives the new capital or a longer-term loan.
What are the risks of a bridge loan?
Cons of bridge loans
- High interest rates: Since lenders have less time to make money on a bridge loan because of their shorter terms, they tend to charge higher interest rates for this type of short-term financing than for conventional loans.
- Origination fees: Lenders typically charge fees to “originate” a loan.
What is the major problem with selling on credit?
When selling on credit, there is a chance that the customer may go bankrupt and fail to pay you. The company will lose revenue. The company will also have to write off the debt as bad debt. Companies usually estimate the creditworthiness or index of a customer before selling to such a customer on credit.
How does bridge financing work?
A bridge loan is a temporary financing option. It is designed to help homeowners “bridge” the gap between the sale of an existing home and the purchase of a new one. You can use the equity in your current home for the down payment on your next property while you wait for your home to sell.
How long can you get a bridge loan for?
Bridge loans (also known as swing loans) are typically short-term in nature, lasting on average from 6 months up to 1 year, and are often used in real estate transactions. They can be used as a means through which to finance the purchase of a new home before selling your existing residence.
Is a bridge loan interest only?
Bridge loans are technically similar to hard money financing. They both have interest-only payment structures and short terms. However, hard money loans usually have higher interest rates between 10% to 18%.
How much can you borrow on a bridge loan?
How much you can borrow with a bridging loan will depend on the value of your properties and your personal finances. The maximum loan, including any retained or rolled up interest is normally limited to 75% loan to value (this can be over multiple properties).
What credit score do you need for a bridge loan?
650 and above
Since the sale of the current property will automatically pay off the bridge loan, the lender can be reasonably certain they will recoup the loan amount. A credit score of 650 and above should be easily approved by private money bridge lender.
What is the alternative to a bridging loan?
Both asset refinancing and invoice finance can be put in place quickly and can provide a cheaper alternative to bridging finance. Other alternatives include development finance, commercial loans, secured loans, commercial mortgages and asset loans.
Is a bridging loan expensive?
Bridging loans are priced monthly, rather than annually, because people tend to take them out for a short period. One of the major downsides of a bridging loan is that they are quite expensive: you could face fees of between 0.5% and 1.5% per month. That makes them much pricier than a normal residential mortgage.
Is a bridging loan cheaper than a mortgage?
While bridging loans can be an excellent short term option, you should be aware they’re usually much more expensive than a traditional mortgage. Plus you’ll often need to pay fees such as administrative fees too.
How much interest do you pay on a bridge loan?
Bridge loans typically have interest rates between 8.5% and 10.5%, making them more expensive than traditional, long-term financing options. However, the application and underwriting process for bridge loans is generally faster than for traditional loans.