Definition of Commercial paper:
Commercial paper was first introduced over 150 years ago when New York merchants began to sell their short-term obligations to dealers that acted as middlemen in order to free up capital to cover near term obligations. These dealers would thus purchase the notes at a discount from their par value and then pass them on to banks or other investors. The borrower would subsequently repay the investor an amount equal to the par value of the note.
Short-term unsecured promissory notes issued by companies.
Commercial paper is a commonly used type of unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities. Maturities on commercial paper typically last several days, and rarely range longer than 270 days. Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates.
Promissory note (issued by financial institutions or large firms) with very-short to short maturity period (usually, 2 to 30 days, and not more than 270 days), and secured only by the reputation of the issuer. Rated, bought, sold, and traded like other negotiable instruments, commercial paper is a popular means of raising cash, and is offered generally at a discount instead of on interest bearing basis. Also called paper. See also government paper.
How to use Commercial paper in a sentence?
- If you want to pay for something but dont like using cash commercial paper can be a good option if the buyer is ok with it.
- The commercial paper market.
- Many corporations use commercial paper as a form of currency indicating the transference of a specified sum of money at a specified time.
- We decided to buy an extremely large amount of commercial paper to best set up our business for continued success.
Meaning of Commercial paper & Commercial paper Definition