Paper Dealer

DEFINITION of 'Paper Dealer'

A market maker that buys and sells extremely short-term corporate bonds called commercial paper. A paper dealer is typically a large financial firm that has the capital and sophistication to distribute commercial paper to investors on behalf of borrowing corporations and to make a market in commercial paper, setting prices at which it is willing to buy and sell.

BREAKING DOWN 'Paper Dealer'

Paper dealers are used by corporations that wish to access the public markets for their short-term borrowing needs. By issuing commercial paper, a corporation may be able to obtain a larger amount of financing and/or obtain a lower interest rate on its short-term borrowings, as compared to seeking a bank loan or other short-term credit facility.
Commercial paper is offered in a range of maturities, from a few days to several months. Occasionally, individual investors can buy commercial paper directly from the issuing corporation. However, it is more common for retail investors to invest in commercial paper through a money market fund or short-term bond fund.

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RELATED FAQS
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    Find out how individual retail investors can purchase short-term commercial paper, but why it rarely makes good investment ... Read Answer >>
  2. Can retail investors buy commercial paper?

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  3. Can a business ever be too small to issue commercial paper?

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