Overview:
Commercial paper is issued in all most in all the states in United States.
At the end of 2009, 1700 companies issued commercial papers to rise the debts. Outside the us market the commercial papers market is more than $500 billion out standings. The commercial papers may issued in different curries dollars, sterling, euros etc
Features Of Commercial Paper
commercial papers are issued on global financial market. The maturity period is not more than 270 days. Commercial papers are issued in money market by the big companies to meet the short term debt of the company. Companies issues commercial papers to meet the short term requirements like meeting of working capital, payrolls etc
Commercial paper is issued in all most in all the states in United States.
At the end of 2009, 1700 companies issued commercial papers to rise the debts. Outside the us market the commercial papers market is more than $500 billion out standings. The commercial papers may issued in different curries dollars, sterling, euros etc
Features Of Commercial Paper
commercial papers are issued on global financial market. The maturity period is not more than 270 days. Commercial papers are issued in money market by the big companies to meet the short term debt of the company. Companies issues commercial papers to meet the short term requirements like meeting of working capital, payrolls etc
- Commercial papers are issued on face value & it can be paid on the maturities
- Commercial papers are issued at discounted value as like treasury bills from face value
- The firms that having excellent credit rating are only able to issue commercial papers to public because those are unsecured securities
- The interest paid on commercial papers are low because of short term issue, however interest are fixed based on market rates but usually it is lower than bank interest rates.
Line Of Credit:
- Commercial paper is low cost alternative after business establishment with strong or high credit ratings. It is cheaper than the bank loan in company prospective
Advantages & Disadvantages On Company Prospective
Advantages:
Advantages:
- After fetching of high credit ratings, it is low cost of capital
- Maturity provides more flexible
- It does not require any assets lien at the time of issue, it is unsecured security
- Traditional commercial papers allow investors with exit option
- Interests paid on commercial papers are less than bank rates
Disadvantages:
- It can be issued by blue chip companies only
- Commercial papers bring credit limits to down
- It is required a high degree control on issue
- Stand by credit is required every time
Commercial Paper Rates
The commercial paper rates may vary based the trend, economy etc Usually commercial paper rates are issued on discount basis. The discount return to subscribers on difference between price paid – face value
The commercial paper rates may vary based the trend, economy etc Usually commercial paper rates are issued on discount basis. The discount return to subscribers on difference between price paid – face value
Commercial Papers In India
Commercial papers in India are additional short term security started on 1990. Commercial papers in India are issued as following institutions:
- Finance & Leasing Companies
- Manufacturing companies
- Financial Institutions
