A large part of corporate borrowing in the U.S. is privately placed bonds that can later be sold to a qualified buyer in the secondary market (SEC Rule 144A). We empirically study a regulatory change in the definition of a qualified buyer to causally link secondary bond market liquidity and corporate borrowing cost. As secondary market liquidity improves with more qualified buyers admitted to the market, the borrowing cost in Rule 144A bonds decreases by 20 bps, which is about 65% of the Rule 144A discount pre-reform. Firms that are more subject to the policy shock start borrowing more and increase payouts, but the effect is concentrated among investment-grade borrowers only.