What are the disadvantages of direct financing?

4) May enhance an organisations international profile- Disadvantages of direct finance- 1) An inability to match preferences between lenders and borrowers- 2) Liquidity and marketability of a security.Click to see full answer. Accordingly, what are the advantages and disadvantages of direct financing provide examples? The Advantages of Direct Finance include: Avoid costs of intermediation. The Disadvantages of Direct Finance include: Matching of preferences between lenders & borrowers is required (amount, maturity structure etc.) Liquidity & marketability of the security, does it have a liquid secondary market? One may also ask, what is direct and indirect finance? Indirect finance is where borrowers borrow funds from the financial market through indirect means, such as through a financial intermediary. Direct Financing You engage in direct financing when you borrow money from a friend, or when you purchase stocks or bonds directly from the corporate issuing them. Also to know is, what is an example of direct financing? An example is a household which buys a newly issued government bond through the services of a broker, when the bond is sold by the broker in its original state. Another good example for direct finance is a business which directly buys newly issued commercial papers from another business entity.What does the lender do in direct financing?Brokers, dealers, and investment bankers play essential roles in direct financing. This method is different from indirect financing, where a financial intermediary takes the money from the lender against a set interest rate and then lends it to a borrower against a higher interest rate.