We argue that networked firms may have an advantage in securing bank finance, especially in countries with weak legal and judicial institutions. An analysis of recent BEEPS data from sixteen CEE transition countries lends some support to this hypothesis: firms affiliated to business associations are more likely to have bank finance while small and medium firms are less likely to secure it. Importance of business networks is particularly evident among firms who borrow from foreign banks in their attempt to hedge risk in an uncertain environment. While greater degree of bank reform has been associated with more bank financing in the region in general, it fails to reach the vast majority of small and medium sized enterprises, thus forcing them to rely heavily on internal finance.