A commercial paper is a document issued by a financial institution to grant the debtor a longer term to pay the commercial debt. It is, therefore, an instrument of finance that arises from the commercial activity and implies a collection right for the issuing entity against the client. In this way, companies ensure payment of the purchase by delaying their payment for a while.
Types of commercial papers
A commercial paper stipulates a short-term debt and we can find different types depending on the document in which the conditions of payment of the debt are collected:
- Receipt: it is a document in which the creditor details the characteristics of the commercial credit, such as the amount or the term, among other nuances. Its main disadvantage is that the name of the debtor does not lie in it, and therefore, the debt is not recognized. With this, the issuer of the receipt has fewer guarantees in the event that it needs to discount it before a third party.
- Bill of exchange: it is one of the most used financial documents in the business world. It is a payment obligation that the creditor issues against the debtor and that can be assigned to a third party. Unlike the receipt, the bill of exchange allows the debtor to sign or accept this document. Therefore, it gives more security in order to discount it by the bank.
- I'll pay: Unlike the two previous documents, this one is issued by the debtor himself. The best known is the bank promissory note and it is characterized mainly by incorporating the number of the current account that is the object of payment and the date on which the payment must be made.