A ﬁrm wishes to obtain short term ﬁnancing at a rate signiﬁcantly below that which a bank would charge. If the ﬁrm is large and highly rated, it may be able to meet its needs by _______________.

Question

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Issuing bankers acceptances is a method of obtaining short-term financing at a lower cost than a traditional bank loan. Bankers acceptances are a form of short-term credit that is backed by a bank. The bank guarantees payment to the holder of the acceptance at maturity, which makes it a highly secure form of financing. For highly rated firms, issuing bankers acceptances can be an attractive option for obtaining short-term financing at a lower cost than other forms of lending.

A ﬁRm Wishes to Obtain Short Term ﬁNancing at a Rate