Borrowing costs tend to be higher with indirect financing versus direct financing because indirect financing involves intermediaries like banks, which add additional costs such as service fees and the need for a higher interest rate to cover their operational expenses and profit margins.

Question

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Answer 1

The cost of borrowing is typically higher with indirect financing compared to direct financing due to the involvement of intermediaries like banks, who charge service fees and require higher interest rates to cover their expenses and make a profit.