Commercial paper is a short-term debt instrument a company issues as an IOU to a bank, another company, or a wealthy individual to raise cash quickly. It usually matures in 270 days or less, so it does not have to be registered with the SEC. On the balance sheet it typically appears as notes payable in current liabilities. Businesses use it to cover immediate operating needs until customer payments come in.

Related Lessons:

• Click Here for our lesson on Bonds
• Click Here for our lesson on Short Term and Long Term Financing for Business