In one to two sentences, explain why borrowing costs would be higher with indirect financing versus direct financing. in a paragraph

Answer 1

Borrowing costs are typically higher with indirect financing compared to direct financing due to the involvement of intermediaries such as banks or financial institutions. These intermediaries charge fees and interest rates to cover their costs, resulting in higher overall borrowing costs for the borrower. Additionally, the presence of intermediaries may also create additional complexities and administrative expenses, further contributing to the higher borrowing costs associated with indirect financing.