Functions of financial institutions:
1. Provide finance by buying shares:

• When the company is in the phase of incorporation, modernization or expansion it associates with financial institutions and asks them to buy its shares.
• This helps the companies to obtain necessary capital from these institutions. Companies may also ask such institutions to become their underwriter i.e. guarantors.

2. Provide finance by loan:

A company can mortgage its assets to take loan from these institutions. To further satisfy its financial needs companies can even mortgage personal properties and avail loan.

3. Help through direct payment for technological services:

At times a company may have to spend heavily in raising technological infrastructure or obtaining technological services. For example, developing and maintaining intranet of the company. Under such situations the financial institutions makes payment on behalf of the companies to the companies providing technology services.

4. Provide guarantee:

A financial institution may agree to become a guarantor of the company i.e. the institution will be liable to pay the company’s debts in case the company is unable to pay. This helps the company in gaining faith of investors and other financial institutions for obtaining finance.

5. Other services:

Financial institutions offer help in establishing a company, conducting market research, providing information about foreign markets, etc.