Commercial paper

Commercial paper is short-term debt issued by companies, usually without collateral, to finance operating needs and other near-term expenses.

Promissory note: A written promise by one party to pay a specified amount to another, either on demand or at a stated date. Commercial paper is commonly issued as a negotiable promissory note.
Working capital: The difference between a company’s current assets and current liabilities, indicating resources available for near-term operations. Companies issue commercial paper to bridge timing gaps in operating cash flows.
Bank loan: A debt agreement in which a bank lends money to a borrower under specified repayment terms. Bank loans can provide committed funding, unlike commercial paper that must be placed with investors.
2008 financial crisis: A global financial crisis marked by severe banking distress, collapsing asset values, and a deep recession beginning in 2007–2008. The crisis sharply disrupted commercial paper funding and prompted emergency market support.
Money market: The market for short-term borrowing and lending, generally involving instruments that mature within a year. Commercial paper is a major source of short-term corporate funding in this market.
Accounts receivable: Money customers owe a business for goods or services already delivered on credit. Receivables can support short-term funding needs before customer payments arrive.
Certificate of deposit: A bank deposit that pays interest and is repayable after a fixed term. Certificates of deposit are bank liabilities, whereas commercial paper is corporate debt.
Asset-Backed Commercial Paper Crisis: The 2007 funding disruption in which investors stopped rolling over asset-backed commercial paper amid uncertainty about underlying assets. It exposed how doubts about securitized collateral can freeze short-term issuance.
Maturity date: The date on which a debt obligation becomes due for repayment. Commercial paper’s short maturity determines when issuers must repay or refinance it.
Inventory financing: Borrowing secured by, or used to acquire, goods held for sale or production. Seasonal inventory purchases can create temporary cash needs met with short-term debt.

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