Commercial Paper

Commercial paper is a type of short-term, unsecured loan that companies use to meet immediate financial needs, like paying for inventory or managing cash flow. It's essentially a promissory note, where a company promises to pay back the borrowed funds, usually within 30 to 270 days. Investors, such as money market funds and banks, purchase this debt and earn interest. Because it's typically issued by well-established companies, commercial paper is considered a low-risk investment. It helps businesses maintain liquidity without resorting to traditional bank loans, which may have stricter requirements.