If you don't have any power-sanding equipment:
A) Don't worry...Plain sandpaper works.
B) Check out TechShop! Scads of tools are available to members. That's right, I made this at Techshop.
Tools & Materials:
1: Scrap wood 1/4-3/4" thick and no smaller than a credit card (hardwood is best; plywood will work)
2: Sandpaper, 60-220 grit
3: OPTIONAL: orbital, belt, or disc sander (with sandpaper in appropriate grits)
4: OPTIONAL: drill or equivalent; cord or chain
Step 1: Choose & Trim Wood
I had some 3"x4" maple trim samples sitting around. I got them free at Zerolandfill. They were painted black on the edges and had a bevel on one side, but that doesn't matter.
So see what you have lying around the shop and trim it into a comfortable-sized rectangle. Try to keep it under 3/4".
Step 2: Form the "Blade"
Use 60-grit sandpaper. Take the orbital sander to one side, sloping it to the edge. Alternately, use plain sandpaper to wear it down, or another sanding tool to achieve the same effect.
Flip the block over and slope the other side. The blade should be thick and stubby.
Starting on the first side again, make the slope gentler. Try to get the cross-section of the tool to look sharp and slender like a bullet.
Step 3: Fine Tuning
-Make sure the blade edge is level going across. Otherwise, it won't consistently crease your paper.
-To get a level edge, hold the folder upright and push it into the table as you sand. Then re-sharpen the blade.
-Smooth the blade's corners so they won't mark paper.
-Move from 60-, to 80-, to 110-, to 220-grit and beyond. Wipe the folder between grits with a damp cloth so extra wood fiber sticks up.
-How sharp do you want this thing? Not sharp enough to be delicate, but not too thick to be effective...run some tests until you're satisfied.
Give most of your attention to the blade, because it needs to be silky smooth.
Step 4: Finishing & Application
Thread a length of cord or chain through the hole, and hang it where it's handy.
I don't finish my folders in fear of stuff rubbing off onto my paper. With use, the edge will get shiny and seasoned. Make sure to keep it clean and true, using light sandpaper to smooth down any problems.
To use your new flat folder, score a line in your paper (or book signature), fold over and belly the paper at the score line (without creasing it), and hold the paper edges down while you drag the folder over the score line toward you.
I must recognize Aldren A. Watson of Hand Bookbinding for the original idea, and for including handmade tools in his book anyway.