In spite of the paramount importance of small and medium enterprise on the contribution of economic development in Tanzania. But still the sector hindered by several challenges. The study aimed to examine Factors influencing the performance of small and medium enterprises in Tanzania, a case of Zanzibar. Qualitative and quantitative techniques were used. The data collected through questionnaire and interview methods and involved 400 respondents. Descriptive statistic and correlation analysis were generated using SPSS version 26 to show the characteristics of the respondents and relationships between the variables of the study. The results of the study show that there is strong significance relationship between the dependent and independent variables at the significant at .01 level (2-tailed). Study shows that, only 17% of the sector are keeping financial record and employments and 82.9% are not keeping the record, 79.9% are registered enterprises and 20.1% are not registered, and only 2.9% use website in the business and 97.1% are not using. The study recommend that small and medium enterprises need to ensure are registered so as to make easy accessing finance from bank, also the government should reduce taxation to allow good performance of the sector in the country.