Commercial Papers

From Financial Literacy Wiki

Commercial papers is a money market security issued by large banks and corporations. It is generally not used to finance long-term investments but rather for purchases of inventory or to manage working capital. It is an alternative to short-term bank loans.

Commercial Papers is generally issued on a discount basis with maturities of 270 days or less. To reduce the default risk, commercial papers are backed with lines of credist from banks that guarantee the issuers will have the cash necessary at maturity. Denominations are usually in amounts of $100,000 or up.