What defines Commercial Bills as a form of short-term debt?

Commercial Bills are defined as short-term debt instruments primarily because they are structured as negotiable instruments known as bills of exchange. These financial tools facilitate businesses in obtaining funds quickly, typically to meet short-term operational needs such as inventory purchases or managing cash flow gaps. They are usually issued by a borrower (generally a company) and sold to an investor, which distinguishes them from other types of loans.

The nature of commercial bills allows businesses to raise funds efficiently, as they are often backed by the promise of the borrower to repay the principal at a future date, usually within a year. This short-term horizon makes them particularly useful for businesses requiring immediate financing.

The other options represent different financial concepts: loans based on inventory refer to inventory financing; loans provided in exchange for equity involve equity financing; and loans secured by personal guarantees involve collateral or security agreements, none of which accurately capture the specific characteristics of commercial bills.