Direct financing is a method of financing in which the borrower borrows funds directly from the financial markets without the use of third party services, such as financial intermediaries. This differs from indirect financing where a financial intermediary takes money from a lender at an interest rate and lends it to a borrower with a higher interest rate. Direct financing is usually done by borrowers who sell securities and/or shares to raise money and avoid high interest rates from financial intermediaries (banks). We may regard transactions as direct financing, even when financial intermediaries are included, if no asset transformation occurs. An example is a household that buys newly issued government bonds through a brokerage service, when a bond is sold by a broker in the country of origin. Another good example for direct finance is a business that directly purchases newly issued commercial paper from another business entity
Video Direct finance
See also
- Indirect financing
Maps Direct finance
References
Source of the article : Wikipedia
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