We utilise unique data to study how European Union subsidies affect the development of credit constrained firms in Hungary. We consider those firms as credit constrained which have been credit checked by unrelated banks – reflecting a loan application – but have not received loans subsequently. Using a difference-in-differences panel regression framework which compares firms that won with those that did not win a subsidy, we find that subsidies improve firms’ growth outcomes. Zooming in, we find a sizeable incremental impact on asset growth of constrained firms that won a subsidy, even though this effect declines over time in magnitude and statistical significance. Yet, in terms of loan access, sales, employment, profitability or labor productivity, subsidies do not lead to an incremental impact – rather, the impact on credit constrained and unconstrained firms is similar. Exact and propensity-score matching reinforce our baseline findings. Our analysis suggests that easing credit constraints is not a major channel for how European Union subsidies may assist firms’ development.