Imperfections in the financial markets due to the presence of agency problems and significant informational asymmetries between borrowers and lenders gives rise to financial constraints which restrict the amount or quality of investment options by firms. The present study has a combined objective. It investigates the presence of financial constraints at firm level via investment cash-flow relation in the context of a developing country like India. Then it tries to determine the preferred choice of firms among the alternative sources of debt financing to alleviate the constraints. The major empirical findings suggest that firms from the Indian manufacturing sector face the problem of financial constraints. As firms seek external borrowing, intermediaries play a relatively more important role in the provision of debt finance to the highly constrained Indian firms than do capital market sources or direct borrowing. Among the intermediaries, bulk of the total borrowings is from the commercial banks.