Unlike a bond, which is repaid over many years, a note is a form of short-term borrowing. In selling a note, the issuer promises to repay the amount of principal borrowed, plus interest, on a certain date. Notes are generally repaid in one year or less.
Types of notes include:
· bond anticipation notes: used to fund the construction phase of the project and later paid off when bonds are issued
· commercial paper: a type of bond anticipation note
· grant anticipation notes: often issued to fund initial spending that is later reimbursed through a grant
· tax and revenue anticipation notes: issued to provide operating money until other revenues are collected.
An additional type of note, capital outlay notes, may be used to finance the construction phase of large projects or to purchase smaller capital assets, such as vehicles or equipment. Capital outlay notes may remain outstanding for up to 12 years.
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