Asset-backed commercial paper program
An asset-backed commercial paper program is like a piggy bank for banks and businesses. They gather lots of money from lots of people and put it all in a big jar.
But instead of putting coins and dollar bills in the jar, they put other kinds of valuable things in the jar, like loans or mortgages that people owe them. They use these valuable things as security or a guarantee that they will pay back the money they borrowed. This is called collateral.
Then, they take little bits of money from the jar whenever they need it to pay for things like building a new office or funding a new project. And when they finish the project or sell the building, they put that money back in the jar to pay back the people who lent them money.
This program is called "asset-backed" because the money they borrow is backed up by the things in the jar, or the assets. It's called "commercial paper" because the little bits of money they take out are like pieces of paper that promise to pay back the money they borrowed.
In short, asset-backed commercial paper program allows banks and businesses to borrow money by promising to pay it back with stuff they already own, like loans and debts, instead of just promising to pay it back with their word.
But instead of putting coins and dollar bills in the jar, they put other kinds of valuable things in the jar, like loans or mortgages that people owe them. They use these valuable things as security or a guarantee that they will pay back the money they borrowed. This is called collateral.
Then, they take little bits of money from the jar whenever they need it to pay for things like building a new office or funding a new project. And when they finish the project or sell the building, they put that money back in the jar to pay back the people who lent them money.
This program is called "asset-backed" because the money they borrow is backed up by the things in the jar, or the assets. It's called "commercial paper" because the little bits of money they take out are like pieces of paper that promise to pay back the money they borrowed.
In short, asset-backed commercial paper program allows banks and businesses to borrow money by promising to pay it back with stuff they already own, like loans and debts, instead of just promising to pay it back with their word.