Asset-Backed Commercial Paper

Asset-Backed Commercial Paper (ABCP) is a short-term debt instrument issued by financial entities to raise funds. It’s backed by a pool of assets such as loans, receivables, or other financial assets, which serve as collateral. Investors buy ABCP expecting a return over a brief period, typically 90 to 180 days, with the issuer promising to pay back the principal and interest. The assets backing the paper help reduce risk, as they can be used to cover payments if the issuer faces financial difficulties. ABCP is often used by corporations and financial institutions for quick funding needs while managing liquidity.