Payment in kind (PIK) is the use of a good or service as payment or compensation instead of cash.
Payments in kind require the payment of interest, which can be paid in cash or non-cash valuations.
While in-kind payment agreements help a company retain its cash, the company often faces higher interest rates that can be added to its principal balance sheet or diluted with equity.
The phrase “payment in kind” also applies to the acceptance of cash for work or services.
The Internal Revenue Service (IRS) refers to payment in kind as barter income and requires people who receive income from barter to report it on their tax returns.