Using loan-level administrative data and a regulatory shock that induced some banks to redirect lending from non-financial firms to Non-Bank Financial Institutions (NBFIs), we find that firms dependent on such banks witness a contraction in total borrowing and experience worse real outcomes. NBFIs use additional bank lending to make new loans, increasing lender. competition and causing reallocation of credit towards smaller, younger, and riskier firms. Additionally, we exploit the unexpected failure of a large NBFI to show that idiosyncratic shocks in the NBFI sector can spread via bank-NBFI connections, reducing credit availability across the economy. Our findings highlight potential concerns related to the bank-NBFI nexus, underscoring the importance of transparency in these linkages.