Outline the factors which contributed to the popularity of commercial papers over bank overdrafts among large corporations in the 1990s.

CPA-Financial-Management-Section-3 Revision kit

Factors contributing to popularity of commercial paper (C.P.)
– Low cost of short term growing (low interest rate)
– No collateral is required. Only a guarantor when borrowing.
– Involves less legal formalities compared to bank overdraft.
– It can secure a huge amount of short term credit compared to bank overdraft.
– Successful issue of a C.P. improves credit rating of the firm and may attract other sources of short term financing

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