Small and Medium Enterprises (SMEs) constituted the backbone of economic development in developing countries, yet access to long-term financing remained a critical constraint to their growth and sustainability. In Kabale Municipality, SMEs faced persistent financial performance challenges despite increasing availability of long-term loan products from microfinance institutions and commercial banks. Understanding how long-term loans impacted financial performance was essential for informing financing strategies and policy interventions to support SME development. The study employed a cross-sectional survey design with mixed methods approach. A sample of 120 SME owners/managers was selected from 287 registered SMEs in Kabale Municipality using stratified random sampling based on business sectors. Data were collected through structured questionnaires and in-depth interviews. Quantitative data were analyzed using SPSS version 26, employing descriptive statistics, Pearson correlation, and multiple regression analysis. Financial performance was measured using profitability ratios, revenue growth, and asset expansion. Qualitative data underwent thematic analysis to provide contextual insights. The findings revealed a significant positive relationship between long-term loans and SME financial performance (r=0.694, p