An interest bearing note represents funds loaned by a lender to a borrower, on which interest is accrued in accordance with the terms of the agreement. These notes have many applications, including the following:
- An account receivable converted into a note, under which a customer is instead classified as a borrower, and pays interest on what had formerly been considered an account receivable.
- A mortgage, where a homeowner agrees to a lengthy series of payments that, depending on the terms, may include both interest and principal repayment components.
- A long-term loan to a company, which is used to support its funding requirements over a multi-year period.
The terms of an interest bearing note may require the borrower to pay back the entire amount of the principal at the end of the term loan, or in a series of payments over the life of the note.