Financial constraints are expected to be severe in Vietnam, especially for private firms, but the quantitative evidence for measuring the gap of financial constraints between SOEs and private firms and the resulting efficiency losses is limited. This paper investigates the size of the capital market distortions using a model of establishment dynamics with different collateral constraints experienced by SOEs and private firms. The model is parameterized to match key data moments calculated from enterprise census (2000-2009). The match is good for targeted data moments but less satisfactory for untargeted data moments. The calibration results confirm that firms in Vietnam face severe collateral constraints, more so for private firms. The resulting TFP losses are large and robust (ranging from 12.4%-19.1% of GDP). This adds extra evidence to the controversy in the literature about whether financial frictions are able to generate large TFP losses. Capital distortions across ownership types are an important channel for misallocation.