Definition: Term bonds are notes issued by companies to the public or certain investors with scheduled maturity dates. In other words, the bonds mature a specific date in the future and the bond face value must be repaid to the bondholder on that date. The term of the bond is amount of time between bond issuance and bond maturity. A 10-year term bond issued on January 1, 2015, for instance, would mature on January 1, 2025.
What Does Term Bond Mean?
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Companies often use bonds to help finance expansions and business growth. Many companies even prefer bond financing compared with stock or equity financing because ownership shares aren’t diluted with bond financing. Companies can issue bonds in many forms like term bonds or serial bonds.
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Term bonds can be secured or unsecured. Secured term bonds use company assets as collateral for the bond note. This gives the bondholder protection in case the bond issuer can’t repay the bonds when they mature. Unsecured bonds don’t use any source of collateral.
Term bonds can also be registered or non-registered bonds. Registered term bonds are assigned or registered to specific person or company. In case the bond certificate comes up missing, the bond issuer will still have the true owner of the bond on record. Companies do not keep registration records for non-registered bonds or bearer bonds. Bearer bonds are similar to cash in that they are untraceable and the person with possession is the legal owner of the note. Bearer bonds must be secured just like cash.
