According to 2015 data, the share of small and medium-sized enterprises in the economy of the Republic of Croatia has been 99.7%, which is almost equal to the structure of the EU economy. Statistics and various other relevant studies show that the small and medium-sized enterprises sector is the foundation and further driver of the social development in the developed countries. It is estimated that the success of small and medium-sized enterprises will be crucial for the future sustainable development and success of the society as a whole, especially in times of crisis. Consequently, both the European Union and the Republic of Croatia have for the longest time provided maximum support for the development of small and medium-sized enterprises and put it at the top of the list of priorities. The aim of this paper is to determine the importance, condition, and environment of small and medium-sized enterprises in the Republic of Croatia as well as the main obstacles to its further development. In order to obtain a better picture of the real situation, a comparison has been made with the key indicators characterizing the sector of small and medium-sized enterprises in the European Union. The main goal of the paper was to identify what are the obstacles for small and medium-sized enterprises development and to analyze the most important ones. In addition to numerical data and theoretical approach, several examples from practice are described in order to obtain a more realistic picture of the depth of the problem that limits and holds back the development of small and medium entrepreneurship in the Republic of Croatia with indications of possible solutions. Various statistical data from relevant sources are presented in this paper, shown by graphs and tables, which easily indicate the importance of small and medium enterprises.