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