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    Advantages and disadvantages of commercial paper

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    What are the advantages of commercial paper in comparison with bank borrowing at the prime rate? What is a disadvantage?

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    Commercial Paper: An unsecured, short-term loan issued by a corporation, typically for financing accounts receivable and inventories. It is usually issued at a discount reflecting prevailing market interest rates.
    source: http://www.investopedia.com/terms/c/commercialpaper.asp

    Commercial paper consists of short-term, unsecured promissory notes issued primarily by corporations. Maturities range up to 270 days but average about 30 days. Many companies use commercial paper to raise cash needed for current transactions, and many find it ...

    Solution Summary

    This solution details the advantages and disadvantages of commercial paper.