The purpose in issuing a bond is to raise capital for undertaking more or less permanent improvements, and this accounts for the length of its maturity. The corporation may secure funds to cover a briefer period of time by means of the short-term note. This instrument is similar in nature to a bond, for both documents are promises to repay borrowed money. They differ in the matter of interest, principal, maturity, and general form. The short-term note is generally used by a corporation in a period when stringency renders the money market unfavorable, especially for long-term borrowers. The note thus bears a higher rate of interest, and because of this expense the makers seek to limit as much as possible both the amount and the maturity of such borrowings. The duration of a short-term note seldom exceeds five, and usually averages two, years. It is also quite informal in content and no seal is required.

Bonds and stocks differ in several important respects. The bond expires after a definite period of time, while the stock has in fact no fixed date of maturity. Furthermore, the interest on the bond must be paid absolutely, while dividends on the stock are distributed only if justified by the earnings of the corporation. In the event of default on either principal or interest, bondholders may press their claims as creditors, while stockholders possess no such rights since they are part owners in the enterprise.