Explain the difference between direct financing and indirect financing as it relates to financial markets and financial institutions

Direct financing is when funds are provided directly in the market. The funds are borrowed from direct investors in the market. For example, when a company issues securities, bonds, shares to investors, and raises the money it is known as a direct method of financing. On the other hand, indirect financing is when the funds are borrowed from middlemen such as banks and intermediaries. The indirect financing method includes payment of higher interest rates as compared to the direct financing method.