This paper examines the impact of financing frictions on total factor productivity (TFP) losses in manufacturing firms in Colombia and Korea, using plant-level data. The authors develop a model of industry dynamics where establishments face financing constraints and idiosyncratic risks are uninsurable. They parameterize the model to match key characteristics of the data from both countries and find that while financing frictions are significant, leading to about half of the establishments being financially constrained, the resulting TFP losses are relatively small. In Korea, the TFP loss is estimated to be around 2%, and in Colombia, it is only 1%. This is attributed to the small differences in returns to capital and variable factors across expanding and contracting plants, which are more pronounced in Colombia due to its lower volatility in productivity. The paper also discusses the role of precautionary savings motives and the severity of borrowing constraints in shaping the overall impact of financing frictions on TFP.This paper examines the impact of financing frictions on total factor productivity (TFP) losses in manufacturing firms in Colombia and Korea, using plant-level data. The authors develop a model of industry dynamics where establishments face financing constraints and idiosyncratic risks are uninsurable. They parameterize the model to match key characteristics of the data from both countries and find that while financing frictions are significant, leading to about half of the establishments being financially constrained, the resulting TFP losses are relatively small. In Korea, the TFP loss is estimated to be around 2%, and in Colombia, it is only 1%. This is attributed to the small differences in returns to capital and variable factors across expanding and contracting plants, which are more pronounced in Colombia due to its lower volatility in productivity. The paper also discusses the role of precautionary savings motives and the severity of borrowing constraints in shaping the overall impact of financing frictions on TFP.