A Primer on Balance Sheet Liquidity

How U.S. Public Companies Both Issue and Invest in Commercial Paper

Executive Summary

Commercial paper is one of the central short-term funding instruments used by large corporations in the United States. The market represents more than one trillion dollars of outstanding securities and forms a core component of the broader U.S. money markets.

While commercial paper is commonly understood as a corporate borrowing instrument, large public companies frequently participate in the market on both sides of their balance sheet. Many corporations simultaneously:

• issue commercial paper to obtain short-term funding
• invest in commercial paper issued by other corporations as part of treasury portfolios

This dual participation reflects the structure of modern corporate liquidity management. Large companies manage both assets and liabilities simultaneously to optimize liquidity, funding flexibility, and capital efficiency rather than simply minimizing gross balance sheet size.

This paper explains how commercial paper programs operate, how corporations invest in commercial paper as treasury assets, examples of major companies doing both, and the strategic rationale behind this balance sheet structure.

The Commercial Paper Market

Commercial paper (CP) is short-term unsecured debt issued by corporations. It typically has maturities ranging from overnight to 270 days, although many issues mature within about thirty days.

Because commercial paper is unsecured, issuers are generally highly rated corporations with strong balance sheets. The securities are typically sold in large denominations and purchased primarily by institutional investors.

Typical investors include:

• money market funds
• banks
• corporations managing treasury portfolios
• securities lenders and other institutional investors

Corporations use commercial paper to finance short-term liquidity needs such as working capital, inventory cycles, payroll, tax payments, and other operating expenses. It is also frequently used for bridge financing in acquisitions or to temporarily fund share repurchases and dividend payments.

For highly rated companies, commercial paper often represents one of the lowest-cost forms of short-term borrowing, frequently cheaper than bank loans with similar maturities.

The Federal Reserve estimates that the U.S. commercial paper market generally ranges between $1.3 trillion and $1.4 trillion outstanding, with a smaller portion issued by non-financial corporations.

Corporate Commercial Paper Issuance

Large public companies typically establish commercial paper programs that allow them to issue short-term notes directly into the money markets. These programs are usually arranged with dealer banks that place the paper with institutional investors.

A typical commercial paper program includes several key components.

First, companies establish an authorized issuance limit, which defines the maximum amount of commercial paper that can be outstanding at any given time.

Second, one or more dealer banks distribute the paper to institutional investors.

Third, the issuing company must maintain strong short-term credit ratings in order to access the market at attractive interest rates.

Finally, most programs are supported by committed revolving credit facilities from banks. These facilities act as backup liquidity in case the commercial paper market becomes temporarily inaccessible.

Many of the largest public companies maintain sizable commercial paper programs. Examples include Apple, Cisco, Alphabet, Intel, Qualcomm, and PepsiCo. These programs can range from several billion dollars to more than twenty billion dollars in authorized capacity.

It is important to note that companies do not always have commercial paper outstanding even when they maintain active programs. Some corporations issue paper continuously, while others use it opportunistically depending on interest rates and liquidity needs.

Corporate Treasury Investment Portfolios

Large public companies frequently maintain substantial cash balances. Corporate treasury teams manage these funds through short-duration investment portfolios designed to preserve capital while maintaining high liquidity.

These portfolios typically contain instruments such as U.S. Treasury bills, agency securities, money market funds, certificates of deposit, corporate bonds, and commercial paper.

Commercial paper is attractive in treasury portfolios because it generally offers slightly higher yields than Treasury bills while maintaining high credit quality and very short maturities.

Under U.S. accounting rules, securities with original maturities of less than three months can often be classified as cash equivalents. As a result, commercial paper investments may appear on corporate balance sheets under cash and cash equivalents or within short-term marketable securities.

The commercial paper held by corporations in these portfolios is issued by other companies, not by the investing firm itself.

Companies That Both Issue and Hold Commercial Paper

Public filings illustrate that many corporations simultaneously hold commercial paper as an asset while also issuing commercial paper as a liability.

Apple provides a clear example. In recent filings Apple reported several billion dollars of commercial paper outstanding while also holding hundreds of millions of dollars of commercial paper within its cash equivalents and marketable securities portfolio.

Cisco provides another example. The company has issued billions of dollars of commercial paper under its program while also holding more than a billion dollars of commercial paper investments across its treasury portfolio.

PepsiCo likewise reports commercial paper borrowings while also holding commercial paper as part of its short-term investments.

Many other large corporations disclose commercial paper holdings within treasury portfolios even when the precise amount is not broken out separately. Companies such as Microsoft, Zoom, Workday, and Qualcomm have disclosed that commercial paper forms part of their cash equivalent or marketable securities portfolios.

This demonstrates that participation on both sides of the market is not unusual among large investment-grade corporations with significant treasury operations.

Corporate Liquidity Architecture

Large corporations typically manage liquidity using multiple layers of financing and liquid assets.

At the most immediate level, companies maintain cash and cash equivalents, including Treasury bills, money market funds, and commercial paper investments.

Beyond this layer, corporations hold larger pools of marketable securities that can be liquidated quickly if needed.

Companies also maintain access to the commercial paper market, allowing them to raise short-term funding efficiently.

In addition, most corporations maintain committed revolving credit facilities from banks that provide additional liquidity support.

Finally, companies access longer-term bond markets for structural financing.

Within this framework, commercial paper plays two roles simultaneously. It serves both as a funding tool when issued and as a short-term investment when purchased.

Strategic Rationale

Corporate treasury departments manage liquidity with several objectives in mind. These include ensuring uninterrupted operating liquidity, minimizing funding costs, maintaining access to capital markets, and preserving strategic flexibility.

Participating in the commercial paper market on both sides of the balance sheet supports these objectives.

First, corporations experience constant timing differences in cash flows. Payroll, tax payments, supplier payments, acquisitions, and share repurchases all occur on different schedules. Maintaining short-term investment portfolios allows treasury teams to deploy funds efficiently while preserving liquidity.

Second, commercial paper often represents the lowest-cost short-term borrowing available to highly rated corporations. Access to the CP market allows companies to fund short-term needs cheaply and flexibly.

Third, treasury portfolios allow companies to invest excess liquidity until it is needed. Rather than holding idle cash balances, firms invest in liquid securities that mature regularly.

Fourth, maintaining active commercial paper programs ensures continuous access to short-term capital markets. This market access can be valuable during periods of financial stress or during large capital allocation events such as acquisitions or share repurchases.

For these reasons, corporations often manage assets and liabilities simultaneously rather than simply eliminating gross balance sheet exposure.

When the Strategy Works Well

Participating in the commercial paper market on both sides of the balance sheet works best for companies with strong credit profiles and significant liquidity management needs.

These companies typically have high credit ratings, large treasury portfolios, committed backup credit facilities, and predictable operating cash flows.

Under these conditions, commercial paper issuance can provide extremely low-cost funding while short-term investments maintain liquidity and flexibility.

Risks and Constraints

The strategy depends on functioning short-term funding markets. During periods of financial stress the commercial paper market can become less liquid.

The 2008 financial crisis demonstrated that disruptions in the commercial paper market can create funding pressure for issuers that rely too heavily on short-term borrowing.

To mitigate this risk, corporate treasury policies typically require commercial paper programs to be supported by committed bank credit facilities and strict internal liquidity limits.

Treasury portfolios also typically maintain conservative credit standards and short durations to protect capital and ensure liquidity.

Conclusion

Commercial paper occupies an important position within modern corporate balance sheet management. Large public companies frequently access the market both as issuers of short-term debt and as investors in short-term securities issued by other corporations.

This dual role reflects the broader evolution of corporate treasury management toward a system focused on liquidity resilience, funding flexibility, and capital efficiency.

Within this system, commercial paper serves both as a source of funding and a liquid investment, making it a central instrument in the architecture of modern corporate finance.

BONUS: Application to Structured Finance - The Strive Digital Credit Model

The balance sheet framework described above also applies to structured finance companies that both issue and hold yield-oriented financial instruments. Strive provides an example of how this architecture can be adapted to a Bitcoin treasury strategy.

Strive operates as a Bitcoin treasury and structured finance company whose objective is to increase long-term Bitcoin exposure per share for its common equity holders while maintaining resilient liquidity and funding structures.

Within this framework, Strive issues Digital Credit through its perpetual preferred equity product known as SATA.

As of the time of writing, Strive has approximately $427.5 million of SATA outstanding.

SATA represents the focal product within Strive’s capital structure. The instrument provides investors with yield and liquidity, while enabling Strive to raise capital that can be deployed to purchase additional Bitcoin.

At the same time, Strive also participates on the asset side of the digital credit market. The company currently holds a $50 million investment in Strategy’s preferred equity, STRC.

This structure mirrors the broader corporate treasury dynamic discussed earlier in the paper. Just as large corporations may both issue commercial paper and hold commercial paper issued by other companies, structured finance companies can issue their own yield instruments while also investing in similar instruments issued by peers.

In Strive’s case, the scale of issuance and investment is intentionally asymmetric. The company has issued substantially more digital credit through SATA than it has purchased through STRC. The STRC position represents a strategic treasury allocation within a substantially larger balance sheet rather than the core of the company’s financing structure.

Strive’s balance sheet strategy centers on maintaining a strong base of Bitcoin while holding sufficient liquid assets to support its funding obligations.

To accomplish this, the company maintains cash and digital credit instruments that generate yield and provide liquidity for operational needs, including the interest payments associated with SATA.

Maintaining this layer of liquid and income-generating assets serves several purposes.

First, it enhances the company’s ability to meet recurring interest obligations on SATA without requiring the sale of Bitcoin during unfavorable market conditions.

Second, it provides a diversified liquidity buffer that strengthens the durability of the capital structure.

Third, allocating a portion of non-Bitcoin assets to digital credit instruments such as STRC allows the company to earn yield while still maintaining assets that possess strong credit characteristics and liquidity profiles.

Within Strive’s broader strategy, SATA is the central product that drives the capital structure flywheel.

The company seeks to establish SATA as a stable digital credit instrument with a consistent market price anchored at $100 per share. A stable preferred equity instrument provides investors with clarity around yield while enabling Strive to scale its digital credit issuance over time.

As this market develops, the company expects the expansion of SATA issuance to create a capital flywheel:

• issuance of SATA raises capital
• capital supports the accumulation of Bitcoin
• increased Bitcoin exposure enhances the long-term value proposition of Strive’s common equity

This framework reflects a broader principle of structured finance: carefully designed funding instruments can allow companies to access capital efficiently while preserving exposure to their core strategic asset.

In Strive’s case, that core asset is Bitcoin.

By combining Bitcoin treasury strategy with a structured credit product such as SATA, the company seeks to build a capital structure capable of supporting long-term Bitcoin accumulation while maintaining liquidity and predictable funding obligations.

Within that system, selectively allocating to STRC can serve as a yield-generating liquidity asset, supporting the durability of the broader capital structure while remaining aligned with the company’s mission.