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This trade credit, as it is commonly called, is the largest single category of short-term credit.Credit terms are usually expressed with a discount for prompt payment.
Therefore, smaller investors can only invest in commercial paper indirectly through their broker or in a money market funds.
An unsecured obligation issued by a corporation or bank to finance its short-term credit needs, such as accounts receivable and inventory. 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.
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They are better suited for large enterprise groups that implement financial management.
Currently, the qualified issuers of super & short-term commercial paper include AAA central enterprises and their core subsidiaries with assets and revenues accounting for over half of their respective groups’ total size.
For many corporations, borrowing short-term money from banks is often a labored and annoying task.
Their desire to avoid banks as much as possible has led to the widespread popularity of commercial paper.