Just a quick question on repurchase agreements.
I get the concept; Company A sells securities to Investor A in exchange for a cash loan, and then buys the securities back at a slightly higher price later.
I understand the incentive for why an investor would want to buy the securities, because they can earn interest on it and so make some money in a short period of time.
My question is, what's the incentive for a company to sell securities in the first place? Eveyerwhere I read said that it's a fast way for them to get money, but seeing as repurchase agreements are typically pretty short-term, how are they making any money or using the loan at all? It just seems like if they take the loan and invest it in something, they wouldn't get very far because they have to buy their securities back (at a higher rate too) essentially the next day.