Abstract. SMEs give big contribution to labor and state budget (APBN), but on the other hand, SMEs face major obstacles in accessing external funding. This is because their low understanding of various aspects in finance. This research aims to examine the effect of external funding on business growth and financial literacy as moderating variable. The research samples are SMEs in Central Java Indonesia and it will be analyzed by using Smart-PLS statistics in order to answer the research hypotheses.

Keywords: SMEs · State budget · External funding · Financial literacy · Smart-PLS