This paper analyzes the relationship between access to finance and growth for small and medium enterprises (SMEs) in emerging markets. This study tests the hypothesis that in developing countries, small businesses hire more employees as the formal banking sector expands its reach; that is, bank access and employment are positively related among small businesses. A business-friendly investment environment is seen by many politicians and economists as the best way to help private enterprises create more jobs and expedite economic growth. While there are many potential constraints to individual business development and expansion – including lack of access to resources, burdensome regulations, and low institutional quality – the responses of emerging market firms to the World Bank’s Enterprise Surveys indicate that lack of access to finance, such as credit lines, is one of the biggest constraints. Without easy, low-cost access to financing, existing firms are unable to effectively allocate their capital and are unlikely to invest in expansion projects. This paper applies a new measure of credit-constrained status to Enterprise Survey respondents. Previous literature has studied the effects of access to finance on enterprise growth and examined the effects of liquidity squeezes on firm behavior, but these studies have been based solely on firm perceptions of credit constraints. Using these new categories, this assessment determines that actual limits on external financing have a