Abstract: This paper presents a dynamic model of firm financing where firms use financial slack to reduce rent extraction by financiers with bargaining power. Financing is lumpy because it is optimal to bargain infrequently. Moreover, firms typically finance ‘early’ before exhausting internal funds to bargain when their outside options are better. Firms with good prospects maintain greater financial slack. Firms with good financing alternatives raise financing frequently while always keeping funds that exceed investment needs, whereas firms lacking such alternatives delay financing until funds are depleted – and may optimally forgo investment – to avoid paying excessive rents. Investment irreversibility increases financing rents.