Financing a company's business is of great importance to the enterprise as it provides the money for the reproduction process. Proper money management leads to profit and is crucial for its maintenance on the market. In addition to their own financing, companies use external financing sources that cause certain costs like interests and. The most dynamic part of the economy of the Republic of Croatia, as well as the rest of Europe, makes a small economy. Small and medium-sized companies make up 99.5% of the total number of registered companies and employ 66% of employees in Croatian companies. The aim of this paper was to determine the impact of external financing on the business of small and medium entrepreneurship. As it is commonly known that such a type of financing can be expensive, the question is, how profitable these resources are for the enterprise. This paper covers the operations of four companies and one craft from the Zadar area that have used external sources of financing in the form of bank loans or minuses during the past period. In this paper, horizontal and vertical analysis of the balance sheet and the RDG, as well as analysis by means of financial indicators, were carried out, and for craft, a review of receipts and expenditures, as well as the book of incoming and outgoing invoices. In four out of five cases, decision to use external sources of finance has led to an improvement in financial performance and all indicators tend to grow.