Loans and financial matters

Corporates have a wide range of financing alternatives, both short and long term to bank loans. The most important substitutes are the following:
Commercial paper. Commercial paper issues are corporate IOUs. They are short term in nature, typically 90 days to one year. They do not pay interest, are issued at a discount to par and are unsecured. In most countries commercial paper can be traded in a secondary market. In effect commercial paper is a form of short-dated zero coupon bond. Commercial paper investors include banks, insurance companies and corporate and institutional treasuries.
Commercial paper issues are most suitable for companies with a short-term or seasonal financing requirement. Some companies do, however, rely on them for long-term funding by continually rolling over their commercial paper. As one issue matures the company makes another.
This funding approach runs the risk of liquidity tightening and the company being unable to roll their paper over or having to pay a steep premium to do so. This occurred in 2002 in the US, for example, after the collapse of a number of large, high profile companies raised widespread investor concern about further corporate failures.

Many large blue-chip corporates have better credit ratings than the banks themselves. There is little reason why such a corporate should pay more for loans from a bank than it receives on any deposits it makes with the bank. Disintermediation. Another major change has been the increased access for corporates to capital markets. Bond, equity and wholesale money markets provide a means for corporates to go directly to investors bypassing the commercial banks as a result. This has been helped by the better credit ratings that many corporates have relative to their aspiring lenders.
This process has been given the accurate, albeit unwieldy, term of disintermediation. These trends have benefited the investment banks at the expense of the traditional commercial banks. The former are able to earn fees from the issuance process and from underwriting guarantees.