Even though the firm internationalization through exports or foreign direct investment (FDI) has increased in recent years, there is only limited evidence on the effect of financing constraints on firm’s outward orientation. This study examines the role of financing constraints in explaining the outward FDI decisions using a unique firm level panel data on Indian manufacturing firms during the period 2007–2014. We consider the role of both internal finance and external finance in firm decisions on outward FDI and employ instrumental variable probit model and random effects probit models to examine the role of financing constraints in outward FDI decisions of firms. The findings suggest that financing constraints, productivity and exporting have significant impact on the outward FDI decision Further, using count data models, we examine the role of financing constraints in determining the more complex strategy of firms regarding number of affiliates abroad. The study shows that firms with higher cash flow and liquidity are more likely to have more number of foreign affiliates.