Small and medium-sized enterprises (SMEs) represent the foundation of the Croatian economic system, key to job creation, innovation and contribution to the gross domestic product (GDP). This paper analyzes the historical development of SMEs, economic contribution, financial opportunities, regulatory challenges and opportunities brought by digital transformation and membership in the European Union. The work methodology includes the analysis of secondary data sources, such as scientific articles, economic reports, statistical data and legal documents. The historical context of SMEs is explored from ancient times, through the socialist period, to the modern market economy. The economic contribution of SMEs was analyzed through their share in GDP, employment and innovation. Financial challenges and opportunities include traditional and alternative funding sources, including EU funds. The regulatory framework and tax system are explored through case studies, while opportunities for digital transformation are analyzed through current reports. In conclusion, the paper provides recommendations for improving the business environment and supporting the further growth of SMEs.