{{One source|date=November 2021}}400px|thumb|The flow of funds from lender to borrower|right '''Indirect finance''' is where borrowers borrow funds from the financial market through indirect means, such as through a financial intermediary. This is different from direct financing where there is a direct connection to the financial markets as indicated by the borrower issuing securities directly on the market. Common methods for indirect financing include a financial auction (where price of the security is bid upon) or an initial public offering (where the security is sold for a set initial price). By allowing borrowers to obtain financing through a third party, indirect financing can improve risk management and liquidity.
==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.<ref>{{cite book |title=The Economics of Money, Banking and Financial Markets |last=Mishkin |first=Frederic |authorlink=Frederic Mishkin |year= 2012|publisher=Pearson Education Limited |location= |isbn=978-0273765738 |page=68 |url=|edition=Global, Tenth }}</ref>
==References== {{reflist}}
==See also== *Direct finance
{{DEFAULTSORT:Indirect Finance}} Category:Securities (finance) Category:Stock market Category:Financial markets