What is the Difference Between Commercial Paper and Commercial Bill?

By Priya Gupta|Updated : July 6th, 2022

Commercial paper is a financial instrument used by banks and financial institutions to raise funds for less than a year. These are considered highly safe, so companies prefer using them. On the other hand, Commercial bills, also known as ‘Bills of Exchange”, are financial instruments used by companies to generate advance payment when the sale of goods takes place on credit. Let us discuss the difference between Commercial paper and Commercial bills in detail.

Difference Between Commercial Paper and Commercial Bill

Check the difference between Commercial paper and Commercial bill from the following table:

Commercial Paper

Commercial Bill

Used by banks and other financial institutions to provide short-term investment

Issued by the bank against the credit transactions of a firm

A discounted instrument having face value and maturity value

Do not have a face value

It is used for a short time period which is less than a year

It is for shorted validity comparatively which is usually 30, 60, or 90 days.

It is used by banks to meet short-term obligations

It is used by companies to get advance money from banks for their credit sales

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FAQs on What is the Difference Between Commercial Paper and Commercial Bill?

  • Both commercial paper and bills are financial instruments issued by banks. When Commercial paper is used to fulfil short-term obligations of banks, commercial bills are used by companies to get advance money for their credit transactions.

  • The major differences between commercial paper and commercial bills are as follows:

    • Commercial paper has a face and maturity value, while commercial bills have no face value.
    • CP is used as a borrowing instrument by the banks, while CB is used as a borrowing instrument for companies.

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