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We study the impact of high and heterogeneous financing costs that firms face on entrepreneurship, firm dynamics, and productivity. Empirically, we examine a unique dataset merging comprehensive credit registry data on all formal loans with panel administrative data on formal firms in Brazi. We document that spreads are substantial and very considerably across firms, firm age, and firm size, even after controlling for default and other loan, lender, and borrower characteristics. Firms who borrow grow rapidly, but high interest rates on credit slow this growth. We incorporate credit spreads into a general equilibrium model with endogenous occupational choice based on Buera, Kaboski, and Shin (2011) and calibrate it to be consistent with the observed spreads and level of credit in our data. High and heterogeneous financing costs cause capital distortions that differ from otherwise equivalent quantity restrictions in their dynamic effects on firm growth. While constrained firms have higher marginal products of capital, when they are price constrained this income goes to lenders rather than being retained as is the case with quantity constraints, e.g., credit rationed via collateral requirements. Thus, self finance is more difficult and firms grow more slowly when facing high spreads. In the quantitative model, the impacts of high and heterogeneous costs of financing are larger than standard quantity-based credit constraints that yield the same level of credit.