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What Is Commercial Paper

A short-term, unsecured financing vehicle used typically by corporations to cover immediate credit needs . It is also used by money markets as a short-term investment vehicle.

  • Commercial paper notes are short-term notes issued in denominations of $100,000 or in an integral multiple of $1,000 in excess of $100,000. The maturity of the notes cannot exceed 270 days from the date of issuance. (maturities ranging from 2 to 270 days).
  • Commercial paper is a short-term unsecured promissory note issued by corporations and foreign governments for many large, creditworthy issuers.  Commercial paper is a low-cost alternative to bank loans.
  • Issuers are able to efficiently raise large amounts of funds quickly and without expensive Securities and Exchange Commission (SEC) registration by selling paper, either directly or through independent dealers, to a large and varied pool of institutional buyers.
  • Commercial paper has become one of America’s most important debt markets, because of the advantages of commercial paper for both investors and issuers.

Reference University of Michigan , eagletraders

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