Definition
A short-term, unsecured debt instrument issued by corporations to raise funds for immediate operational needs such as payroll or inventory. It typically matures within 270 days or less.
Why It Matters
Commercial paper allows large, creditworthy firms to obtain short-term financing at lower interest rates than traditional bank loans, helping maintain liquidity in financial markets.
Example
A corporation issues 90-day commercial paper to cover short-term operating expenses until expected revenue is received.