Backup Line

  

Think: backup line of credit. A backup line is a line of credit used by a bank to cover any issue of commercial paper that does not have financing. Commercial paper is an unsecured (not backed by collateral), short-term (usually less than 270 days) debt instrument issued by a corporation. It is basically a money-market account. So, in short, a backup line is a secondary source of funding (liquidity) for a corporation.

Related or Semi-related Video

Finance: What is a Liquid Market?17 Views

00:00

Finance allah shmoop What is liquid market Well it's one

00:07

that trades Ah lot High volume Lots of buyers Lots

00:11

of sellers Liquid lots of cash sloshing this way In

00:15

that way Go this way and that Did you ever

00:17

see a liquid market go this way and that That

00:20

little song Did you ever see a lassie Never mind

00:23

All right Weir Liquid markets Good Well because they implied

00:26

there's Lots of cash ready willing and able to be

00:29

put to work And that's usually a sign of a

00:31

healthy risk seeking active market versus risk averse one which

00:36

is you know hiding Ah liquid market means that investors

00:40

want to put their cash toe work that they have

00:43

actually saved cash along the way and or that they

00:46

have relatively easy access to credit And you can think

00:49

about it from the perspective of your kindly loving realtor

00:53

who wants a world where lots of people are buying

00:56

homes But in orderto have that happen you have to

00:58

have lots of people who are also selling homes at

01:01

the same time Otherwise prices just go higher and higher

01:04

with no supply to meet demand And at the end

01:06

of the day in real estate and it's in the

01:08

stock market while the most important thing yes that the

01:11

brokers get pays So that's a liquid market one that

01:15

trades a lot like it's Wet trading back and for

01:18

sloshing around not ice Where everything's you know all jammed 00:01:22.109 --> [endTime] up No needs heat or an animal or something

Up Next

Finance: What is a Line of Credit?
133 Views

What is a line of credit? A line of credit is kind of like a loan. A bank gives a borrower a line of credit, which basically says they can borrow â...

Finance: What is collateral?
98 Views

What is collateral? Any type of asset or property that a borrower pledges as security for a loan is classified as collateral. As the lender has a c...

Finance: What is a Money Market Fund?
80 Views

What is a Money Market Fund/Commercial Paper? Money Market Funds are mutual funds that are very safe and liquid. They invest in cash and securities...

Finance: What is liquidity preference?
27 Views

What is liquidity preference? When a company goes under, a company’s assets are liquidated to pay back creditors and then shareholders. The liqui...

Find other enlightening terms in Shmoop Finance Genius Bar(f)