What is an Anticipation Note?

An anticipation note refers to a short-term municipal obligation issued to meet temporary financial needs. It is short-term because it has a duration of less than one year. Funds to pay of the principal of a note in the future are referred to as anticipated". Future long-term, taxes, government grants, principal repayments, bond issues, and other forms of revenue may be used to cover the payment of principal.

How Does an Anticipation Note Work?

Anticipation note is for meeting the state or cities short-term cash flow to provide means of managing the timing mismatch between its expenses and its revenues. Anticipation notes are of different types, and they include: Revenue anticipation notes (RANs) - It is issued with hope that not-tax revenue like state or federal aid will be the one to service the debt. Tax anticipation notes (TANs) - It is used in the expectation that there will be future collections. Bond anticipation notes (BANs) - These one functions as bridge loans and are given out when the municipality anticipates a future longer-term bond issuance to settle the anticipating note at maturity. Tax and revenue anticipation notes (TRAN) - These are paid off with a mixture of revenue and taxes.