Who Issues Commercial Paper: Ratings, Exemptions, and Placement

Commercial paper is issued by large nonfinancial corporations, financial institutions and bank holding companies, and special purpose vehicles that pool financial assets and issue asset-backed notes. Because commercial paper is unsecured short-term debt, only entities with strong credit profiles can realistically tap the market, and as of late February 2026 roughly $1.4 trillion was outstanding in the United States.¹ Investors buy on the issuer’s promise to repay at maturity, so who issues commercial paper is, in practice, a short list of well-known corporate names, large financial firms, and regulated conduits.

Large Nonfinancial Corporations

Established companies use commercial paper to cover everyday operating costs — payroll, raw materials, seasonal inventory — without taking on long-term debt. As of February 2026, nonfinancial issuers accounted for about $360.7 billion of total commercial paper outstanding.¹

Retailers often ramp up issuance before peak shopping seasons to stock up on inventory. Manufacturers use it to keep production lines running between the time they pay suppliers and the time they collect from customers. For companies with top-tier credit ratings, the borrowing cost is generally lower than a traditional bank loan. Notes are almost always sold in large minimum denominations, typically $100,000 to $250,000, which limits the investor pool to institutions rather than individuals.

Financial Institutions and Bank Holding Companies

Financial firms, including bank holding companies and insurance companies, represent the largest segment of the market. Foreign and domestic financial issuers together accounted for the majority of outstanding paper as of late 2024, with foreign financial firms alone representing roughly 31 percent.²

Bank holding companies issue paper to fund lending across their subsidiary banks, moving capital where it’s needed most. Insurance companies use it to maintain enough liquid cash to cover policyholder claims. These issuers prefer commercial paper because they can adjust how much they borrow on very short notice, sometimes overnight, to match shifting liquidity needs.

Asset-Backed Commercial Paper Conduits

Special purpose vehicles, often called conduits, issue a distinct type known as asset-backed commercial paper (ABCP). Instead of relying on the general creditworthiness of a parent company, these notes are backed by a pool of financial assets such as auto loans, credit card receivables, or residential mortgages. Asset-backed issuers accounted for about 29 percent of all outstanding commercial paper as of late 2024.²

A conduit purchases assets from an originating company and issues commercial paper to fund the purchase. That structure isolates the assets from the originating firm’s broader financial risks. Federal rules add two layers of protection. A regulated liquidity provider must commit to covering 100 percent of outstanding ABCP plus accrued interest, and that commitment cannot be reduced based on the credit performance of the underlying assets or calculated with regard to any other credit enhancement. Separately, the originator that sold assets into the conduit must retain an economic interest in the credit risk, aligning its incentives with investors.³

Credit Rating Expectations

No law requires commercial paper to carry a credit rating, but the market effectively demands one. Institutional investors, particularly money market funds, generally will not purchase unrated paper. S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings collectively cover over 95 percent of the credit rating market and are each registered with the SEC as nationally recognized statistical rating organizations.

Each agency assigns short-term ratings on a simple scale:

S&P: A-1 (strongest), A-2, A-3
Moody’s: P-1 (strongest), P-2, P-3
Fitch: F-1 (strongest), F-2, F-3

Issuers rated below the top two tiers generally face significantly higher borrowing costs or may be shut out of the market entirely.

SEC Registration Exemptions

Commercial paper avoids the full SEC registration process through two main exemptions under the Securities Act of 1933. Meeting the conditions of at least one exemption is essential. Paper sold without registration and without a valid exemption would violate federal securities law.

Section 3(a)(3) Exemption

The primary exemption, found at 15 U.S.C. § 77c(a)(3), treats qualifying commercial paper as an exempt class of security. Three conditions apply.⁴

Maturity limit. The paper cannot have a maturity exceeding nine months from the date of issuance, exclusive of any grace period. In market practice, this is commonly treated as 270 days.
Current transactions. The proceeds must be used for short-term operational needs, such as covering operating expenses, purchasing inventory, financing receivables, or similar working capital purposes.
No permanent financing. The paper cannot fund long-term investments or permanent asset purchases. Temporary construction financing is acceptable as long as the issuer plans to pay off the paper with long-term funding once the project is complete.

The current transactions requirement doesn’t mean the issuer must trace every dollar from a specific note to a specific expense. Instead, the issuer needs to demonstrate it has enough short-term funding needs to justify the size of its commercial paper program, for instance by showing a sufficient level of receivables or inventory.

Section 4(a)(2) Exemption

The second common exemption, at 15 U.S.C. § 77d(a)(2), covers private placements, meaning transactions that don’t involve a public offering.⁵ Paper sold under this exemption goes only to sophisticated investors who don’t need the protections of full SEC disclosure. Unlike the Section 3(a)(3) exemption, there is no restriction on how the issuer uses the proceeds and no statutory maturity ceiling, making this route attractive for companies that want more flexibility in their borrowing programs.

Backup Lines of Credit

Nearly all commercial paper issuers maintain backup credit facilities with banks. These credit lines serve as insurance. If the issuer can’t sell new paper to repay maturing notes, it can draw on the backup facility instead. The arrangement reassures investors that the issuer won’t default simply because the market temporarily freezes.

Banking regulators treat these commitments seriously. Under the Liquidity Coverage Ratio framework, banks that provide dedicated liquidity facilities backing commercial paper programs must hold high-quality liquid assets equal to 100 percent of the unused commitment. General-purpose credit lines extended to nonbank companies carry a lower reserve requirement of 40 percent.⁶

How Issuers Reach Investors

Issuers get paper into investors’ hands through one of two channels: selling directly to investors, or using a securities dealer as an intermediary. Which route an issuer uses tends to track what type of firm it is.

Direct Placement

Direct placement is dominated by large financial institutions. Financial issuers account for roughly 80 percent of all directly placed commercial paper. These firms have established relationships with institutional investors like money market funds and can sell without paying dealer fees. Issuers with direct access to buyers tend to be more creditworthy and better connected in the financial system.⁷

Dealer Placement

Nonfinancial companies almost always use dealers. A dealer, typically an investment bank, buys the paper from the issuer and resells it to investors, earning a spread on the transaction. While this costs the issuer more than direct placement, it provides access to a broader pool of buyers. Dealers earn higher spreads when working with issuers that have little or no ability to sell directly, such as nonfinancial companies and ABCP conduits.⁷

1
Board of Governors of the Federal Reserve System. Commercial Paper Rates and Outstanding
2
U.S. Department of the Treasury. FSOC 2024 Annual Report
3
eCFR. 17 CFR 246.6 – Eligible ABCP Conduits
4
Office of the Law Revision Counsel. 15 U.S. Code 77c – Classes of Securities Under This Subchapter
5
Office of the Law Revision Counsel. 15 U.S. Code 77d – Exempted Transactions
6
Board of Governors of the Federal Reserve System. The Liquidity Coverage Ratio and Corporate Liquidity Management
7
Board of Governors of the Federal Reserve System. Dealer Intermediation in the Primary Market of Commercial Paper