What is the minimum typical sale amount for commercial paper?

Commercial paper is a short-term unsecured promissory note issued by companies to raise funds, typically to meet immediate financial obligations or manage cash flow needs. The market for commercial paper operates primarily for larger corporations and institutional investors, who typically engage in these transactions due to the nature and risks associated with borrowing.

The minimum sale amount for commercial paper is generally around $1,000,000. This threshold is established to make the issuance of commercial paper economically viable for both issuers and investors. Transactions of this magnitude reduce transaction costs on a per-unit basis and allow issuers to attract larger institutional investors who are looking for substantial investment opportunities.

Additionally, since commercial paper is often issued in sizable amounts and is not backed by collateral, the standard minimum amount of $1,000,000 reflects the risk level and ensures that only entities with substantial creditworthiness can effectively participate in the market. This creates a barrier to entry for smaller companies, which often do not have the scale or credit rating to issue such instruments, maintaining the integrity and stability of the commercial paper market.