Can bank loans make informal firms formalize? We match the universe of bank loans, the social security records, and the economic censuses in Mexico to track formality, loans, and firm transitions from 2005 to 2025. Three facts emerge. Three quarters of firms with a bank loan are informal; informal firms pay higher rates, provide more collateral on collateralized loans, and obtain smaller loans; and firms move between formality and informality in both directions. We develop a model in which firms that need a loan and are at the margin between being formal and being informal change their status when the relative terms or availability of loans change. Leveraging bank credit supply shocks, we find that a ten percent credit supply expansion widens the financial advantage of formal firms and, as the model predicts, raises the number of firms that formalize by 850 (0.5 percent) and lowers the number of firms that become informal by 600 (0.4 percent) per five-year window in our sample markets. We demonstrate that bank loans affect not only formal firms but also informal ones, and are a lever for formalization.