When a company like Gulf Oil Corp. or Coca-Cola Co. needs short-term cash, it rarely turns to a commercial bank. For a well-known corporation with a good credit rating, there is cheap money available -- not at the banks, but in the commercial-paper market, where institutional investors are quite willing to lend at rates well below the prime. The maturity for the paper is as short as 7 days and as long as 270 days. Depending on market conditions, the interest-rate savings may range from one percentage point to three or more.

Altogether, there are about $180 billion worth of IOUs floating around the commercial-paper market (including those of financial institutions), but virtually none of them come from smaller companies. The reason is that institutional investors are reluctant to gamble on the creditworthiness of companies with which they are unfamiliar, no matter how solid the underlying business maybe.

Now, however, a New York City company named IDBI Managers Inc. is trying to remedy this situation. IDBI, a bondinsurance underwriter, has been negotiating with a large insurance company to provide a new type of coverage against commercial-paper default. With such insurance, small but creditworthy companies with annual sales of less than $10 million would be able to issue unsecured commercial paper on the credit of the insurance company. They would thus be able to finance their working-capital needs by selling short-term IOUs -- just as the giants do.

If all goes well, the insurance could be available as early as this spring, according to IDBI president Michael Curley. It won't be cheap. Curley estimates that, to cover the cost of IDBI's detailed credit analysis and the insurance, corporate borrowers will have to pay a total of about one percentage point on top of the prevailing commercial-paper rates for the highest-rated companies. In late December, the paper rate was 9.75%, compared with the prime rate of 11%. But even with an extra point, says Curley, "commercial paper will usually be cheaper than borrowing from a bank."

Bankers, of course, aren't apt to be overjoyed by the appearance of commercial-paper insurance. The obvious worry is that some of their most profitable lending business may disappear. But for many banks, says Curley, the new insurance may actually help. "A lot of the smaller banks have lending limits of less than $2 million," he points out. "So commercial paper could be a way for the bank to hold on to a growing customer."

In any case, Curley says that IDBI, which has been insuring industrial revenue bonds since 1982, plans to design other products aimed at giving smaller companies more financial flexibility. "We're not a bank," he notes, "but we think small companies should be able to do most things that big companies do. You might say that we're interested in bringing Wall Street to Main Street."

The Securities and Exchange Commission has good news for companies gearing up to do an initial public offering (IPO). Beginning March 31, 1984, first-time equity issuers will be able to raise up to $7.5 million by registering under S-18, a route that requires less disclosure and, generally, less time and money than a standard S-1 filing.

The SEC introduced form S-18 back in 1979, in order to streamline the requirements for small companies wishing to go public. Under the 1979 rules, a business was entitled to raise as much as $5 million in an IPO once it had obtained the green light from one of the SEC's nine regional offices or its national headquarters in Washington, D.C. In addition, application requirements were simplified. With a regular S-1 filing, for instance, a company has to furnish audited financial statements reflecting the preceding three completed fiscal years. But S-18 demands only two years of audited financial statements.

The net result was to speed up the application process, in part because the regional offices may be able to respond faster than the Washington, D.C., office, and also because there is less information to review. "By using S-18, a company can cut two to four weeks off its processing time at the SEC," says Peter M. Rosenblum, an attorney with Foley, Hoag & Eliot, a Boston law firm.

Now the SEC has made the S-18 route even more attractive by raising the ceiling on offerings to $7.5 million. Investment bankers expect that the total number of S- 18 filings will increase dramatically as a result. With the $5-million ceiling in effect, the SEC says that nearly one-third of the 1,967 initial public offerings in fiscal 1983 were registered under S-18. But "there's a material difference between $5 million and $7.5 million," says Thomas J. Shields, a limited partner at Bear, Stearns & Co. "In addition to obtaining more money, the larger issue size permits a company to sell more shares. Investors and underwriters like that because it means that there will be a broader market."

For that reason, if no other, it is likely that more and more prospective issuers will be taking the S-18 path to the public market in the future.

What do you do when your multiproduct company is barely breaking even and the most profitable part of the business needs lots of cash?

Albert W. Ondis, founder and president of Atlan-Tol Industries Inc., grappled with this very question last spring. And, with the help of accountants and investment bankers, he found an unusual solution.

Atlan-Tol is a 15-year-old, $14-million-a-year public company in West Warwick, R.I. Although organized as a single company, it has been involved in two distinct businesses from its early days. Through one, it supplied the electronics industry with metal-plated plastic film and plating equipment. In its other business, the company designed and manufactured graphic recording instruments used in such applications as electrocardiograms.

Last year at this time, the graphic recording equipment business was going great guns, accounting for about 70% of overall sales. Orders flowed in from such customers as IBM Corp. and American Hospital Supply Corp., and there was a need for additional capital to support the growth.

But recent losses from the plating operations were causing problems. The losses had seriously sapped Atlan-Tol's earnings and depressed its stock price. "Selling more [Atlan-Tol] stock would have been very unappealing," says Ondis, who owned 47% of the company's shares.

So he was in a quandary. The company needed money, but, if he waited for the price of Atlan-Tol's stock to rebound, business would suffer. In an effort to find a solution, the 57-year-old marketing specialist approached Baker, Watts & Co., a Baltimore investment firm, which suggested an intriguing alternative: Why not spin off the graphic recording business into a new company and then take its stock to the public market? The offbeat approach, dubbed the "equity carve-out" on Wall Street, had already been used successfully by, among others, Cooper Laboratories Inc. and Trans World Corp. For Atlan-Tol, notes Ondis, "it seemed like an ideal way to finance the business."

To set the ball rolling, Atlan-Tol brought in a team of auditors from Arthur Andersen & Co., the national accounting firm. Over the next two and a half months, the accountants spent hundreds of hours piecing together separate financial statements for the new company, called Astro-Med Inc.

When all the costs and revenues had been allocated, the audit showed that Astro-Med was even more profitable than Ondis had assumed, having earned $634,000 on sales of $7 million in the fiscal year ended January 31, 1983.

Such numbers certainly did the company no harm when Astro-Med went to market with an initial public offering last May 25. Shares sold for about 23 times the previous year's earnings. By selling only 18% of its shares (the remaining equity was retained by Atlan-Tol) the new company still managed to raise about $3 million, even after deducting underwriting costs and a whopping $137,000 accounting bill.

As for the proceeds, they have been used to pay off about $1 million of long-term debt, expand working capital, and double the research and development budget of the graphic recording business. A new type of recording device was introduced in November 1983.

Meanwhile, Ondis, who is also chairman and chief executive officer of Astro-Med, has been besieged by requests for offering prospectuses from companies and underwriters considering similar financings. He credits the innovative financing technique with putting his business back on track. "Around here, we call it a pretty good deal," he remarks. "If we hadn't found some new money, we would have been forced to put most of our plans on hold."