Commercial Paper

Commercial Paper

See Also:
Convertible Debt Instrument
NonInvestment Grade Bonds
Collateralized Debt Obligations
External Sources of Cash
Certificate of Deposit (CD)
What Your Banker Wants You To Know
Commercial Bank
Convertible Debt Instrument

Commercial Paper Definition

Commercial paper is a short-term debt instrument. Companies can borrow money by issuing it to investors.
It is unsecured, meaning collateral does not back it up. Values range from $25,000 and up. Furthermore, the typical value is $100,000. Maturities range from 2 days to 270 days, and the typical maturity is 30 days. As long as the maturity is less than 270 days, you do not have to register the debt with the SEC. It is often issued at a discount from par value, issued with interest payments, or both. Credit rating agencies rate commercial paper.

When to Issue Commercial Paper

Companies that issue commercial paper are typically large corporations with good credit. They issue it because the debt instruments have flexible maturities. They are also usually cheaper than bank loans. Finance the current assets and short-term obligations using the proceeds. Then issue it directly to investors or via a dealer.
Investors that invest in commercial paper, usually large-scale institutional investors such as mutual funds, consider it issued by a creditworthy corporation to be a safe investment. However, the returns earned on it are low.
commercial paper
 

ARTICLES YOU MIGHT LIKE

Mining the Balance Sheet for Working Capital

Mining the Balance Sheet for Working Capital Let’s face it… There has been significant liquidity in the marketplace over the past couple of years. Debt and equity capital has been relatively easy to find and commercial banks have been very willing participants as capital providers; however, many of the commercial banks have admitted that this robust marketplace

Read More »

Is Your Business Bankable?

Businesses call us for many reasons but here are two very common reasons why we get called… They are growing and want to strengthen the financial function. OR They are in financial distress and can’t find a way out. Why does a business need to be bankable? What does being bankable mean? In this blog,

Read More »

Alternative Forms of Financing

It happens all the time. Companies need capital, but they aren’t bankable. Banks or other financial institutions will not touch them because they are either too risky, not able to meet covenants, or it just doesn’t work out for some reason. So, where do those companies go? They need to look at alternative forms of

Read More »

JOIN OUR NEXT SERIES

Financial Leadership Workshop

MARCH 28TH-31ST 2022

THE ART OF THE CFO®

Financial Leadership Workshop

Days
Hours
Min

September 12-15th 2022

Days
Hours
Min
SHARE THIS ARTICLE

JOIN THE NEXT STRATEGIC CFO™ WORKSHOP SERIES

Strategic CFO™ Financial Leadership Workshop
The Art Of The CFO®

Days
Hours
Min

December 5-8th, 2022