What is the difference between commercial paper financing and traditional financing

Difference between commercial paper financing and traditional financing channels

Currently, the demand for small business financing is only increasing, and the use of enterprise financing is relatively broad, whether it is internal operations or external business operations are inseparable from the flow of funds, so the financing channels have become a business from time to time to consider the issue of the present note financing channels and traditional financing channels, what are the advantages of the comparison? First of all, we will be the traditional financing methods and commercial paper financing methods for dismantling analysis.

A traditional financing:

In traditional financing, most of the internal financing and external financing to solve the funding problem, but more commonly used is equity financing, debt financing

1. Equity financing: the enterprise through the transfer of equity to obtain financing. The funds obtained by equity financing do not require the enterprise to repay capital and interest, but the new shareholders will share the profits and growth of the enterprise with the old shareholders as well.

2. Debt Financing: The act of obtaining financing by issuing and promising to pay interest and repay principal to bondholders on a regular basis through legal procedures.

Second, commercial paper financing channels:

Small and medium-sized enterprises to commercial promissory notes as a payment and settlement, the invoicing enterprise in the commercial paper after the issuance of the VAT input tax can be deducted, and the receipt of the bill according to the commercial promissory notes promissory notes acceptance expiry of the acceptance of the low-risk nature of the purpose of optimization of the enterprise statement can be achieved. At the same time, due to the fact that commercial acceptance has the characteristics of liquidity (the rights stated on the commercial paper can be freely circulated by way of endorsement and transfer), causality (the holder does not need to prove the reason for acquiring the bill of exchange when exercising the rights of the commercial paper), quick realization in the case of credit line, and low financing cost, it has evolved from the initial payment tool to a financing tool. Therefore, commercial paper holding enterprises can realize financing by applying for discounting to banks or third-party financial institutions.

The above is my personal opinion, for reference only

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