In most European countries mainstream financial institutions are scantly able to provide affordable credit facilities to small firms. In Italy in the last decades, the wave of mergers and acquisitions has reduced the number of banks and created large national and multinational bank holding companies; this process has changed lending behaviour and the relationship between banks and firms, forcing small firms to finance their growth almost exclusively through retained earnings. Using a large firm-level panel data set to analyze the relevance of liquidity constraints on firm growth in Italy, we will show that the severity of liquidity constraints hit the growth of SMEs, in particular in the Southern «backward» regions of Italy. The dependence of firm growth on inside finance is more intense for firms operating in the less developed regions of the country. To analyze the impact of liquidity constraints on firm growth we will carry outsuch analysis also considering growing cash-flow sensitivity within the main industries of the manufacturing sectors to evaluate if specific patterns prevail among the different industries examined.