Final answer:
Borrowing from the Federal Reserve is not a main source of funds for finance companies, as they typically raise capital through issuing bonds, issuing commercial paper or obtaining bank loans.
Step-by-step explanation:
Main Sources of Funds for Finance Companies
Finance companies have several sources for raising funds to pursue their business activities. The main sources include: issuing bonds, issuing commercial paper, and securing bank loans. Issuing bonds and commercial paper allows them to raise significant capital for their various activities such as investing in projects, paying off older debts, or acquiring other companies.
However, borrowing from the Federal Reserve is typically not a main source of funds for finance companies. This is mainly because the Federal Reserve lends to commercial banks and not to finance companies directly. Finance companies would usually issue bonds to raise capital when they need large sums of money, while bank loans might be preferred for smaller, more customized borrowing needs.
Borrowing from a bank also offers a significant advantage of keeping the firm's control intact as it does not involve selling off company ownership to the public, which happens when issuing stock and involves becoming responsible to a board of directors and shareholders.