What is the Difference Between Commercial Paper and Commercial Bill?

Commercial paper and commercial bills are both short-term financial instruments used by banks and financial institutions. However, there are key differences between the two:

1. Issuance: Commercial paper is a short-term, unsecured debt instrument issued by corporations and financial institutions. Commercial bills, on the other hand, are issued by a seller to a buyer and are typically used to finance trade transactions.
2. Purpose: Commercial paper is used to raise funds for working capital and other short-term needs. Commercial bills are used by businesses to generate advance payment when selling goods on credit.
3. Maturity: Commercial paper usually has a maturity period of less than a year. Commercial bills typically have a shorter validity, often ranging from 30 to 90 days.
4. Face Value and Discount: Commercial paper is a discounted instrument with a face value and maturity value. Commercial bills do not have a face value.
5. Usage: Banks use commercial paper to meet short-term obligations. Companies use commercial bills to obtain advance money from banks for their credit sales.

Comparative Table: Commercial Paper vs Commercial Bill

Here is a table highlighting the differences between commercial paper and commercial bills:

Commercial Paper is a short-term, unsecured debt instrument issued by corporations typically for the financing of short-term liabilities such as payroll, accounts payable, and inventories. It is used by banks and financial institutions to provide short-term investment and is issued at a discount from face value.

Commercial Bill, also known as a "Bill of Exchange," is a financial instrument used by businesses to generate advance payment when selling goods on credit. It is issued by banks on behalf of the firm and does not have a face value. Commercial bills are used to help companies get money in advance for sales they make.