The term includes health-care-insurance receivables. The term does not include i rights to payment evidenced by chattel paper or an instrumentii commercial tort claimsiii deposit accountsiv investment propertyv letter-of-credit rights or letters of credit, or vi rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card. The term does not include persons obligated to pay a negotiable instrument, even if the instrument constitutes part of chattel paper. A authenticated by a secured party ; B indicating the aggregate unpaid secured obligations as of a date not more than 35 days earlier or 35 days later than the date of the record; and C identifying the components of the obligations in reasonable detail.
Asset-Backed Commercial Paper As a result, only firms with high-quality debt ratings will easily find buyers without having to offer a substantial discount higher cost for the debt issue. Other corporations, financial institutions, wealthy individuals and money market funds are usually buyers of commercial paper.
Advantages of Commercial Paper A major benefit of commercial paper is that it does not need to be registered with the Securities and Exchange Commission SEC as long as it matures before nine months, or days, making it a very cost-effective means of financing.
Although maturities can go as long as days before coming under the purview of the SEC, maturities for commercial paper average about 30 days, rarely reaching that threshold.
The proceeds from this type of financing can only be used on current assets, or inventories, and are not allowed to be used on fixed assetssuch as a new plant, without SEC involvement.
Commercial Paper During the Financial Crisis The commercial paper market played a big role in the financial crisis starting in As investors began to doubt the financial health and liquidity of firms such as Lehman Brothersthe commercial paper market froze and firms were no longer able to access easy and affordable funding.
Another effect of the commercial paper market freezing was some money market funds, substantial investors in commercial paper, "breaking the buck.
Example of Commercial Paper An example of commercial paper is when a retail firm is looking for short-term funding to finance some new inventory for an upcoming holiday season.
This interest rate can be adjusted for time, contingent on the number of days the commercial paper is outstanding.
Want to know more? Read Introduction To Commercial Paper.Board of Governors of the Federal Reserve System. The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible, and stable monetary and financial system. Rated, bought, sold, and traded like other negotiable instruments, commercial paper is a popular means of raising cash, and is offered generally at a discount instead of on interest bearing basis.
Also called paper. Definition of commercial paper: An unsecured obligation issued by a corporation or bank to finance its short-term credit needs, such as accounts.
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Definition of Commercial paper in the Financial Dictionary - by Free online English dictionary and encyclopedia. What is Commercial paper? Meaning of Commercial paper as a finance term. Finance. corporate; personal; public; Commercial paper, in the global financial market, is an unsecured promissory note with a fixed maturity of not more than days.
Commercial paper is a money-market security issued (sold).