This paper models the choice between bank debt and trade credit for entrepreneurial firms. The model allows for debt renegotiations once financial distress occurs and derives the impact of private benefits of control. Compared to banks, suppliers have a larger implicit equity stake in their customers and therefore adopt a more lenient liquidation policy, but charge a higher price for credit. Entrepreneurs raise exclusively bank debt when the price advantage outweights the cost of the stricter liquidation policy. Low-quality entrepreneurs with substantial control rents finance partly with trade credit to prevent defaulting on the bank debt. We provide supporting empirical evidence for this model using data on a unique sample of business start-ups.