DEFINITION of 'Bond Anticipation Note - BAN'

A short-term interest-bearing security issued in advance of a larger, future bond issue. Bond anticipation notes are smaller short-term bonds that are issued by corporations and governments, such as local municipalities wishing to generate funds for upcoming projects. The issuing bodies use the bond anticipation notes as short-term financing, with the expectation that the proceeds of the larger, future bond issue will cover the anticipation notes. Bond anticipation notes may be used when the issuer wants to delay a bond issue, or if the issuer wishes to combine several projects into one larger issue. Bond anticipation notes are typically payable from the proceeds of the sale of the bonds.

BREAKING DOWN 'Bond Anticipation Note - BAN'

Bond anticipation notes are often used as a means of kick-starting funding efforts for new projects. Once the project is started, the larger bond issue may generate enough funds to cover the bond anticipation notes in a short period of time. Often, the notes are repaid within one year of issue. Bond anticipation notes are generally considered to involve a relatively low risk exposure, and, due to their short time horizon, investors should evaluate the basis of the notes and determine if there will be enough momentum and interest in the project. Investors can find BAN opportunities through local brokers, municipalities and other financial institutions.

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