This paper examines whether the source of capital affects a firm's capital structure. The authors argue that firms may be rationed by lenders, leading to some firms appearing under-levered relative to unconstrained firms. They find that firms with access to public bond markets, as measured by having a debt rating, have significantly higher leverage ratios compared to firms without such access. Even after controlling for firm characteristics and the endogeneity of having a bond rating, firms with access to public debt markets have 40% more debt. The study also explores the differences in firm characteristics between those with and without access to public debt markets, finding that firms with access are generally larger, have more tangible assets, are older, and have lower market-to-book ratios. The results suggest that the source of capital significantly influences a firm's capital structure choice, indicating that firms may face credit rationing even when they have access to public capital markets.This paper examines whether the source of capital affects a firm's capital structure. The authors argue that firms may be rationed by lenders, leading to some firms appearing under-levered relative to unconstrained firms. They find that firms with access to public bond markets, as measured by having a debt rating, have significantly higher leverage ratios compared to firms without such access. Even after controlling for firm characteristics and the endogeneity of having a bond rating, firms with access to public debt markets have 40% more debt. The study also explores the differences in firm characteristics between those with and without access to public debt markets, finding that firms with access are generally larger, have more tangible assets, are older, and have lower market-to-book ratios. The results suggest that the source of capital significantly influences a firm's capital structure choice, indicating that firms may face credit rationing even when they have access to public capital markets.