Small and medium enterprises are the drivers of any national economy. The most dynamic part of the total economy makes a greater share in employment, total income and exports. For 89 the smooth operation of small and medium-sized enterprises is crucial sufficient capital, but because of their size they have problems in access to various sources of funding. The aim of this study was to investigate on the basis of secondary literature and primary research through the questionnaire the possibility of applying the German model of financing small and medium enterprises in the Croatian SMEs. The study was conducted on 118 surveyed Croatian enterprises Split-Dalmatia County and 89 German enterprises surveyed federal state of Hesse. The results showed no difference in the use of non-traditional sources of financing between Croatian and German SMEs, but the availability of non-traditional sources of funding is higher in Germany. Furthermore, there is a difference in the use of bank credit and the German SME increasingly using bank loans as compared to Croatian SMEs because they are more favorable conditions for German SMEs and banks refuse a small percentage of loan applications. Tested German companies find it less impact of administrative barriers, unfavorable financing conditions and support from the state of access to external sources of funding in relation to Croatia examined companies. The relevant institutions are important for the promotion of small businesses. Programs to encourage the more widespread in Germany because there are programs at the federal state level, the state and the EU. By joining the EU, Croatian SMEs have access to EU subsidy programs, or encourage certain activities and areas are neglected. Based on the research it can be concluded that the financing model of the German SMEs can be partially applied. Croatia is on the right track, but need to invest more effort in creating a favorable environment to better access to various sources of financing and to the relevant institutions should listen to the needs of SMEs and encourage more activities and areas where support is most needed.