commercial paper

Definition

An unsecured obligation issued by a corporation or bank to finance its short-term credit needs, such as accounts receivable and inventory. Maturities typically range from 2 to 270 days. Commercial paper is available in a wide range of denominations, can be either discounted or interest-bearing, and usually have a limited or nonexistent secondary market. Commercial paper is usually issued by companies with high credit ratings, meaning that the investment is almost always relatively low risk.

Use commercial paper in a sentence

The commercial paper was not really physical as much as it was just an obligation that everyone knew had to be carried out.

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The commercial paper loan was necessary as the project lacked equity and funding so after we accepted the loan we moved forward.

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While most individual investors may not have heard of commercial paper, it is critical to the short-term cash needs not only of banks and financial institutions, but corporations in other sectors as well.

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