We study the role of firms’ financial constraints on entry and bidding behavior in public procurement auctions. Our analysis leverages a reform in the Chilean public health agencies that significantly reduced payment delays to suppliers. Using a difference-in-differences approach, we find that reducing payment delays enhanced competition in procurement auctions by increasing participation from smaller, liquidity-constrained firms. Additionally, we document a reduction in prices for a subset of narrowly defined pharmaceutical products, highlighting the reform’s potential to generate savings for public procurement.