Two Name Paper

What Is a Two Name Paper?

In finance, "two name paper" is a casual term alluding to a contract that hosts been endorsed by two gatherings. It is explicitly with regards to commercial paper instruments, for example, trade paper or promissory notes.

How Two Name Papers Work

A two name paper is commonly utilized as a type of short-term financing for trade acceptances. In these agreements, a provider consents to stretch out credit to its customer, ordinarily for a set term like 30 days. In this scenario, the provider would be the issuer of the trade acceptance, though the customer would be its receiver. On the off chance that the two players sign the document, it would be viewed as a two name paper.

One more setting in which the term "two name paper" is utilized is where one party is endorsing the commercial paper. For instance, the customer's bank could consent to underwrite their trade acceptance with their provider. In this occasion, the two marks could comprise of the provider and the bank, making the bank responsible to repay the debt assuming the customer neglects to do as such.

Two name papers are widely utilized in business since they can give a period proficient and generally direct method for expanding credit between parties. Critically, these agreements don't need huge contribution from legal counselors, bankers, or other [intermediaries](/go between), making them a possibly appealing and savvy financing solution. Of course, their moderately casual nature likewise requires a somewhat high amount of trust, since two name papers might be more challenging to implement than additional conventional agreements.

Real World Example of a Two Name Paper

Michael is an investor represent considerable authority in small to medium-sized private businesses. As of late, he has agreed with the owner of XYZ Industries by which Michael will purchase the business for $1 million. Michael doesn't wish to invest all of his cash into this transaction, so he proposes to fund part of the purchase by giving a two name paper.

In particular, Michael recommends that he pay $300,000 of the purchase price in cash while paying the balance through a promissory note. In particular, the terms of this promissory note would expect Michael to pay the seller of XYZ $100,000 each year for the next 7 years, with interest of 5.00% payable financially past due on the unpaid portion. In the event that the two parties consent to these terms, their names and marks would be applied to the promissory note, making this document a two name paper.

Highlights

• Another common model are the promissory notes frequently used to finance private acquisitions.
• A two name paper is a type of contract bearing the names of two parties.
• It frequently alludes to short-term contracts, for example, those used to finance accounts payable.