Is taking out a loan at a commercial bank direct or indirect financing
Taking out a loan at a commercial bank is considered indirect financing.
Indirect financing refers to obtaining funds through an intermediary, such as a bank or a financial institution. In this case, the borrower receives funds from the commercial bank, which acts as the intermediary between the borrower and the ultimate investors of the funds. The bank assumes the risk associated with lending money and charges interest to the borrower.
Direct financing, on the other hand, involves obtaining funds directly from investors without the involvement of intermediaries. Examples of direct financing include issuing bonds or equity shares to raise capital.