Capital Note

DEFINITION of 'Capital Note'

Short-term unsecured debt generally issued by a company to pay short-term liabilities. Capital notes carry more risk than other types of secured corporate debt, because capital note holders have the lowest priority. The capital note often has a higher interest rate because it is unsecured.

BREAKING DOWN 'Capital Note'

The interest rate offered on a capital note is heavily dependent on the credit rating of the business, because it is all the investor has to rely on. Banks may issue capital notes in order to cover short-term financing issues, such as being able to meet minimum capital requirements. Capital notes are typically not callable.

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RELATED FAQS
  1. What is the difference between secured and unsecured debt?

    Understand the difference between secured and unsecured debt and how the reliability and trustworthiness of the issuing entity ... Read Answer >>
  2. Does working capital include short-term debt?

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  3. How can I consolidate my unsecured debt?

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  4. How do interest rates influence a corporation's capital structure?

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  5. What is the difference between secured and unsecured debts?

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