An abbreviation for payment in kind. It refers to interest or dividend income that is paid by a borrower through the issuance of debt or stock (new securities) instead of through periodic cash payments. A mezzanine lender receives cash when the new security is sold or repaid at the maturity date of the loan. This financial tactic represents a twist on interest payment that is usually used by cash-strapped businesses. Instead of making interest payments in cash, they offer them in new debt or stock.

The new securities constitute a riskier investment because the investor (the lender), instead of being paid in cash, agrees to receive a security whose future value may widely fluctuate (i.e., it may be associated with a high degree of uncertainty).