A forgivable loan, also called a soft second, is a form of
loan
In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that d ...
in which its entirety, or a portion of it, can be forgiven or deferred for a period of time by the lender when certain conditions are met. It is more like a
grant
Grant or Grants may refer to:
Places
*Grant County (disambiguation)
Australia
* Grant, Queensland, a locality in the Barcaldine Region, Queensland, Australia
United Kingdom
*Castle Grant
United States
* Grant, Alabama
*Grant, Inyo County, C ...
with conditions rather than a loan as in most cases the loan is forgiven if all the conditions are met. However, if the conditions are not met the loan has to be repaid usually with interest. It can be seen as an incentive for the borrower to perform or achieve a goal set by the lender.
Forgivable loans are sometimes used in the
financial services
Financial services are the Service (economics), economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, acco ...
industry to lure a
financial advisor
A financial adviser or financial advisor is a professional who provides financial services to clients based on their financial situation. In many countries, financial advisors must complete specific training and be registered with a regulatory ...
from one
firm
A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal person, legal or a mixture of both, with a specific objective. Company members share a common p ...
to another. For example, an advisor may be offered an incentive, structured as a four-year loan if he moves his book of business to the firm. The loan is made up of four equal
annual payments
Annual may refer to:
*Annual publication, periodical publications appearing regularly once per year
**Yearbook
**Literary annual
*Annual plant
*Annual report
*Annual giving
*Annual, Morocco, a settlement in northeastern Morocco
*Annuals (band), a ...
, each of which is forgiven as they become due if the advisor continues to work for the firm.
See also
*
Golden handcuffs
Golden handcuffs, a phrase first recorded in 1976, refers to financial allurements and benefits that have the objective to encourage highly compensated employees to remain within a company or organization instead of moving from company to company ...
*
Golden handshake A golden handshake is a clause in an executive employment contract that provides the executive with a significant severance package in the case that the executive loses their job through firing, restructuring, or even scheduled retirement. This can ...
References
Loans
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