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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Advance Refunding Or Prefunding


The concept is arcane. But you gotta understand the basic concept of Prefunding. Bad things sometimes happen, even to good people. So in the case of "safe" bonds or bonds where an Administrator is worried about the cash actually getting to the people to whom it was intended, a Prefunding feature can be required. That is, when a bond is issued, a chunk of money is tucked away safely in a nice Escrow account with a bank or trust company so that the odds of the money actually being there for a distribution or a call provision are high. It's extra netting under the financial high wire.