It has different meanings in different contexts. A capital note may refer to a hybrid security (a hybrid); a form of security that is used in structured finance, combining the features of debt and equity (both bonds and shares). A capital note can also be either an equity security or a debt security, depending on the core underlying component. In all meanings, the designation “capital” implies that the security ranks relatively low/ junior in the issuer’s order of priorities in claims for its net assets.

Generally speaking, a capital note is a short-term unsecured security issued by an entity to finance short-term requirements. Capital notes are associated with a higher degree of risk than other types of secured debt, due to the lowest priority on the hierarchy of claimants.