What is a direct issuer?

Direct issuers are businesses that have decided to sell commercial paper themselves rather than selling paper using an intermediary service. This allows companies to communicate directly with retail investors who want to get part of the issued securities. Direct issues can use this approach, then income should be generated to handle a short -term situation or project.

To understand why the company can decide to function as a direct issuer, it is important to understand what is meant by commercial paper. In most cases, commercial documents are short -term debt liabilities that are created to solve a specific task that the company considers desirable but does not want to tie other assets to perform the task. One example of a commercial document is a bill of exchange, which is often a simple unsecured debt obligation with life with a maximum of nine months.

The intention of a direct issuer is to honor the commercial document within the time frames specified in the transaction. It is expected to beUs will often be carried out by means of income generated by a project or a task that has been financed from the income of issuing debt obligation. However, it is not uncommon for a direct issuer to be a company that is already very profitable, and has a resource to cover the debt if the project does not bring sufficient profit at the time the commercial document is due. For this reason, a retail investor can often deal with a direct issuer with a very low degree of risk.

As with many types of investment, it provides commercial paper offered by a direct issuer, for investors the opportunity to get a return on the purchase of paper. This return is usually accepted after the paper has reached full maturity. At that moment, the direct issuer will return both the principle and any interest to be due in the note. Although the return is often worth the investor's efforts, it is usually not a spectacular amount of earnings. Nevertheless, the low level of risk includes this type of transaction attractive to investors who are more conservative in SEducation of investment habits.