Commercial Paper

Commercial paper consists of short-term, unsecured promissory notes issued by corporations for specific amounts and with specific maturity dates.


Many companies issue commercial paper to raise cash needed for current transactions, with many finding it to be a less costly alternative to bank loans. Investors can take advantage of commercial paper because it may be sold at a discount rate or may be interest-bearing. Terms can be as short as one day and do not exceed 270 days.

Commercial paper offerings are evaluated by key credit rating agencies. Agencies take into consideration the corporation’s financial status, resources and competitive position within its industry. For commercial paper to make investment grade, it must have a rating of A1, A2 or A3 from Moody's and P1, P2 or P3 from Standard & Poor's (S&P).


Commercial paper offerings are evaluated by key credit-rating agencies. A fairly liquid secondary market allows investors to sell or trade commercial paper offerings. The market price is dependent upon the fluctuation of interest rates, as it is with any fixed-income security.


The commercial paper secondary market provides access to maturities up to 270 days, but usually greater than 30 days.


Issues are offered with numerous terms and structures to meet your investment needs. Commercial paper offerings are available in an assortment of credit qualities and maturities. Commercial paper notes are issued with short-term maturities that do not exceed 270 days. The commercial paper secondary market provides access to maturities greater than 30 days.


An element of risk exists because commercial paper is an unsecured, promissory note made by the issuing corporation. Commercial paper does not need to be registered with the Securities and Exchange Commission (SEC) as long as it matures before nine months (270 days), making it a very cost-effective means of financing for the issuers with high-quality credit.