The study investigated the relationship between debt financing and financial performance of SMEs in Masaka City, Uganda. The study objectives were to: (i) examine the relationship between long-term loans and Financial Performance of selected SMEs in Masaka City, (ii) establish the relationship between short-term loans and Financial Performance of selected SMEs in Masaka City, and (iii) investigate the relationship between trade credit and Financial Performance of selected SMEs in Masaka City. The study employed a cross-sectional research design along with quantitative and qualitative approaches. From a study population of 320, a sample size of 252 respondents was used. Data was collected using questionnaires and an interview guide. Qualitative data was analyzed using content analysis, while quantitative data was analyzed using descriptive statistics (mean and standard deviation) and inferential statistics (correlations and regression analysis).  The study concludes that there are significant positive relationships between various forms of financing and the financial performance of SMEs in Masaka City. Specifically, the Pearson correlation coefficient for long-term loans is 0.854, indicating a strong positive association, with a regression coefficient of 0.523 signifying that each unit increase in long-term loans corresponds to a 0.523 unit improvement in financial performance. Similarly, short-term loans exhibit a correlation coefficient of 0.640, with a regression coefficient of 0.286, demonstrating that increases in short-term loans lead to significant financial enhancements for SMEs. Trade credit shows a robust correlation of 0.835 and a substantial regression coefficient of 0.673, further underscoring its critical impact on financial performance. Thus, these findings emphasize the essential role of long-term loans, short-term loans, and trade credit in promoting the growth and sustainability of SMEs in the region, warranting targeted interventions to improve access to these financial resources. The study recommends that financial institutions, local government authorities, and SMEs in Masaka City implement various strategies to improve financial performance. These include enhancing lending criteria, providing training programs, establishing mentorship networks, and offering incentives. Additionally, the study recommends developing tailored financing products, establishing strong supplier relationships, and creating a supportive regulatory environment to encourage the use of trade credit and promote SME growth.