Pros and cons of commercial paper

Question

What are the pros and cons of commercial paper relative to bank loans for a company seeking short-term financing?

Answer 1

Commercial paper is usually a cheaper source of short-term financing for a firm, compared to bank loans. A larger amount of funds can often be raised by issuing commercial paper. Bank loans are usually a more flexible source of short-term financing and establishing an on-going business relationship with a bank may prove beneficial when money is tight.