Commercial Paper is an important debt instrument used by eligible organisation for raising the funds. There are certain advantages of raising funds, through commercial paper along with some disadvantages. Explain the dem

Demerits of Commercial Paper Commercial Paper is a short term instrument. The duration generally ranges from 7 days to 364 days. Thus it is suited for short term borrowings only. Commercial Paper is an unsecured instrument. Since by nature Commercial paper is unsecured, only financially secure and highly rated organizations can raise money through Commercial Paper. New and moderately rated organizations may not be as successful in raising funds through Commercial Paper The amount of money that can be raised through commercial paper is limited to the deductible liquidity available with the suppliers of funds at a particular point. The duration of commercial paper cannot be extended. Mutual Funds, which are the largest investors, invest only in listed Commercial Paper. Thus in case the Commercial Paper is unlisted, it may lose out on Mutual Funds as investors.