We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is a Paper Dealer?

Patrick Wensink
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

A paper dealer has nothing to do with paper products used to print on, write on or read. Instead, this person deals with the commercial promissory notes known as commercial paper. A dealer purchases these papers and sells them to buyers, acting as a middleman for this type of investment.

Commercial paper shares many similarities with stocks and bonds issued by a company. These are short-term securities sold by banks and corporations in order to make money quickly. These notes have a maturity length of one to 270 days and feature the repayment date and amount on the note. There is a large amount of risk associated with these notes, because the original issuers do not back these notes with collateral. Instead, the buyer assumes that the money will be repaid strictly on the issuing organization's credit history.

Commercial paper has been traded since the 1800s and continues to be a popular way to acquire money quickly. More than 1,500 companies issued these promissory notes in 2009 alone. The popularity does not mean they are risk-free, as paper dealers learned in 1970, when Penn Central defaulted on more than $77 million US Dollars (USD), leaving investors without any repayment.

The paper dealer works much like a stock trader but focuses attention on these commercial papers. A paper dealer often works for a brokerage firm, because the firm has the capital to purchase large numbers of papers and has the capital to take the risk of working with them. The goal of a paper dealer is to purchase these commercial papers and sell them to buyers for a higher price. Generally, thousands of papers must be sold to turn a significant profit, so dealers must handle large quantities.

A paper dealer is used as a last resort for many issuing organizations because of the fees dealers frequently charge. Dealers charge different percentage points based on what institution they work for, but the generally require 0.05 percent of the sale price as a commission. This small percentage — one 20th of one percent — adds up to a sizable number when hundreds of thousands of commercial papers are being sold. Many times, an institution will feature its own paper dealer department, cutting out a step in the process and saving its from paying a commission.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Patrick Wensink
By Patrick Wensink , Former Writer
Patrick Wensink, a bestselling novelist and nonfiction writer, captivates readers with his engaging style across various genres and platforms. His work has been featured in major publications, including attention from The New Yorker. With a background in communication management, Wensink brings a unique perspective to his writing, crafting compelling narratives that resonate with audiences.

Discussion Comments

Patrick Wensink

Patrick Wensink

Former Writer

Patrick Wensink, a bestselling novelist and nonfiction writer, captivates readers with his engaging style across various...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.