- Indirect finance
Indirect finance is where borrowers borrow funds from the
financial market through indirect means, such as through afinancial intermediary . This is different from direct financing where there is a direct connection to thefinancial market s as indicated by the borrower issuing securities directly on themarket . Common methods for direct financing include a financialauction (where price of the security is bid upon) or aninitial public offering (where thesecurity 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 lowers bond prices (provided that tax savings has a tangible affect on bond pricing and that the aforementioned would pass these tax savings to their respective clientèle). This could be applied in a number of applications from infrastructural investment to education or military spending.
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