Question

What is the difference between a bond payable and a note payable? Define each

Answer 1

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What is the difference between a bond payable and a note payable? Define each.

The main difference between notes payable and bonds is applicability of securities laws. Bonds are always considered and regulated as securities, while notes payable are not considered as securities. For example, securities law explicitly defines mortgage notes, commercial paper, and other short-term notes as not being securities under the law.

Generally, the term of the debt is the best way to determine if its a note or a bond. Shorter-term debts of maturity less than one year are mostly considered as notes. Debts with longer terms are more likely to be bonds.