Indirect financing means that there is no direct relationship between capital surplus units and capital shortage units. Instead, an independent transaction with financial institutions was made. That is to say, a surplus fund can be issued through deposit, or purchased by banks, trusts, insurance and other financial institutions.The funds which are temporarily idle will be provided to these financial intermediaries in advance. And then the financial institutions, in the form of loans, discounting, etc., or by purchasing the securities that need funds, provide the funds to these units, thus realizing the process of financing.
The basic characteristic of indirect financing is financing through financial intermediaries. It consists of two links: raising funds and utilizing funds by financial institutions. Securities issued by financial institutions are referred to as indirect securities.