Commercial Paper Funding Program - Explained
What is the Commercial Paper Funding Program?
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What is a Commercial Paper Funding Program (CPFP)?
A Commercial Paper Funding Program is a system established by the United States Federal Reserve Board to improve the markets short-term liquidity. Basically, the CPFP program provided short-term funding to the United States commercial papers issuers.
Commercial paper funding program has the following benefits:
- It can be used by credit providers to obtain liquidity by simply transferring the commercial paper to the third party.
- It allows the debtor to get short-term fund at a considerably lower price than that of bank credit.
A major drawback of a Commercial Paper Funding Program is that there is no guarantee that payment will be fulfilled. In other words, there is a possibility of a debtor defaulting to meet the payment obligation especially after the CPFP expires.
What are the types of Commercial Paper funding Program?
There are various types of Commercial Paper Funding Program. They include the following:
- Receipt: This refers to a document given by a creditor which highlights the main features of the commercial credit. For instance, the amount involved and the term/period. Note that in this type of document does not show the debtor. This means that there is no debt recognition. This makes the creditor have a small number of guarantees where he/she requires to deduction from a third party.
- Bill exchange: This is the most widely used document in business traffic when it comes to CPFP. The document is usually meant to ensure that the debtor agrees to the obligation of repaying back the loan. It is usually given out by the creditor to the debtor and can at the same time be transferred to a third party if need be. The debtor is supposed to sign the receipt to accept the responsibility. This gives provides utmost security in case the bank decides to give a discount.
- I will pay: This document is different from the two above. This is because unlike the two, the debtor is the one who issues this particular document. In this case, the payment obligation is recognized by the debtor and not the creditor. A bank promissory note is known for this purpose. It consists of the current account payment as well as the payment date.
- Commercial Paper (Intro)
- What is Commercial Paper?
- Negotiable Instrument
- What are the common types of commercial paper?
- Promissory Note
- Cashier's Check
- Convenience Check
- Certified Check
- Substitute Check
- Bill of Exchange
- Bank Draft Definition
- Sight Draft Definition
- Bankers Acceptance
- Who is a Holder of a negotiable instrument?
- Commercial Paper Funding Program
- What is Negotiability and why is it important?
- What is required for commercial paper to be negotiable?
- Sum Certain (Contracts)
- Inflation Adjustment Clause
- When does commercial paper contain an Unconditional promise to pay?
- Backup Line of Credit
- What is Payable on Demand or Payable on Time?
- What is Order Paper and Bearer Paper?
- Bearer Form
- How is a payee identified on the negotiable instrument?
- What rules does the court apply in determining negotiability?
- How is commercial paper negotiated to a holder?
- What is Transfer of a negotiable instrument?
- What is Indorsement of a negotiable instrument?
- What are the various types of indorsement?
- Bank Endorsement
- Blank Endorsement
- Accommodation Endorsement
- How does a holder receive payment on a negotiable instrument?
- Who is potentially liable on (or obligated to pay) a negotiable instrument?
- When is an individual liable for a representative signing a negotiable instrument?
- What rules apply if a holder loses a negotiable instrument?
- When is payment of a negotiable instrument overdue?
- What effect does a negotiable instrument have on the underlying obligation?
- What is a holder in due course?
- What are the requirements for a holder to become a holder in due course?
- Receive an instrument for value?
- Receive an instrument in good faith?
- Receive an instrument without notice of a valid defense?
- How does discharge of the Underlying Obligation affect a holder in due course?
- What is the Shelter Rule?
- Can you limit a transferee from becoming a holder in due course?
- Personal Defenses?
- Real Defenses?
- What is a Claim in Recoupment?
- What are the rights of a holder in due course if the instrument involves a consumer transaction?
- What happens if a negotiable instrument is Forged?
- What happens if a negotiable instrument is Stolen?
- Guaranty or Guarantee
- Letter of Guarantee
- Personal Guarantee
What is the role of a Guarantor or Surety of a negotiable instrument?
- Accommodation Paper Definition
- Secondary Liability
- Avalize Definition
- What is an Accord & Satisfaction?
- What is primary and secondary liability on an instrument?
- What is Drawer or Maker Liability for a negotiable instrument?
- What is Transferor Warranty of a negotiable instrument?
- What is Indorser Warranty of a negotiable instrument?
- What is Presentment Warranty of a negotiable instrument?
- What is a warrantors liability for a dishonored note or draft?
- What is the time limitation for warranty of a negotiable instrument?
- When are the warranties of a negotiable instrument discharged?