The inefficiency of traditional financing mode

The procedure of direct financing is more complicated, the financing efficiency is lower and the financing cost is higher; The indirect financing procedure is simpler, the process is simpler, the financing efficiency is higher and the financing cost is lower.

Indirect financing refers to the financing activities of enterprises with the help of financial institutions such as banks, which is a traditional financing type. Banks and other financial institutions play an intermediary role in the process of indirect fund-raising activities. They gather capital first and then provide it to fund-raising enterprises. The basic ways of indirect financing are bank loans and financial leasing.

Refers to the financing activities of enterprises to finance funds through banks and other financial institutions. The basic way of indirect financing is bank loans, in addition to trust loans, financial leasing and other financing methods.

Features: financial institutions play an intermediary role, mainly forming debt funds, with simple procedures, high financing efficiency and low financing cost, which are easily restricted and influenced by financial policies. Indirect financing mainly refers to bank financing, including private lending. In essence, it is to lend the money saved through the intermediary of the bank. Because of the participation of banks, it is called indirect.

concept

Refers to the units that hold temporarily idle monetary funds in the form of deposits, or purchase securities issued by banks, trusts, insurance and other financial institutions, and provide their temporarily idle funds to these financial intermediaries in advance.

Then, these financial institutions will provide funds to these units in the form of loans and interest subsidies. , or through the purchase of securities issued by units that need funds, so as to realize the process of financing.