Abstract: We use the Great Recession as a laboratory to dissect the implications of financial constraints in small firms. We exploit firm-level eligibility requirements for a credit guarantee scheme launched in the UK in 2009 as an exogenous determinant of financial access during the crisis. Using a difference-in-difference methodology, and novel small-firm data, we show that eligible firms relatively increased their borrowing, employment, sales, profits, and survival, but disinvested as much as non-eligible businesses. The results show that employment can be more sensitive to financial constraints than fixed assets, likely because fixed assets can be pledged as collateral whereas employees cannot.