Indirect finance is where borrowers borrow funds from the

financial market A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial market ...

through indirect means, such as through a

financial intermediary A financial intermediary is an institution or individual that serves as a middleman among diverse parties in order to facilitate financial transactions. Common types include commercial banks, investment banks, stockbrokers, pooled investment funds ...

. This is different from direct financing where there is a direct connection to the

s as indicated by the borrower issuing securities directly on the

market Market is a term used to describe concepts such as: *Market (economics), system in which parties engage in transactions according to supply and demand *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an ...

. Common methods for direct financing include a financial

auction An auction is usually a process of buying and selling goods or services by offering them up for bids, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition ex ...

(where price of the security is bid upon) or an

initial public offering An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investme ...

(where the

security" \n\n\nsecurity.txt is a proposed standard for websites' security information that is meant to allow security researchers to easily report security vulnerabilities. The standard prescribes a text file called \"security.txt\" in the well known locat ...

is sold for a set initial price).

Indirect financing (government)

This is where the government gives privilege, in the form of reduced tax burdens, as a means of supporting a particular interest rather than collecting and redistributing tax revenue (which would be considered as a direct financing method by the government). For example, a reduced tax burden on financiers provides focused monetary benefits and helps to effectively lower bond prices (provided that tax savings has a tangible effect on bond pricing and that the aforementioned would pass these tax savings to their respective clientele). This could be applied in a number of applications from infrastructural investment to education or military spending.

Indirect financing (government)

References

See also