Which financial instrument is typically used for short-term borrowing needs?

The financial instrument typically used for short-term borrowing needs is commercial paper. This type of unsecured debt instrument is issued by corporations to finance their immediate cash flow requirements, such as payroll, inventory, or accounts payable. Commercial paper is generally issued at a discount and has maturities that range from a few days to up to 270 days, making it ideal for organizations looking to meet short-term liquidity needs quickly and efficiently.

While bonds are primarily used for long-term financing and have longer maturities, equity shares represent ownership in a company and are not used for borrowing. Real estate investment trusts (REITs) focus on income-generating real estate and provide a means for investing in real estate without direct ownership, also not suited for short-term borrowing. Thus, commercial paper stands out as the preferred instrument for short-term borrowing, aligning with the financial needs of companies seeking quick, temporary funding.