This study aims to find out more about the policy of the existing capital structure at the Small and Medium Enterprises (SMEs), the influence of the ratio of debt to assets, the ratio of sales to assets, the loan term to the benefit of business, types of financial institutions, and the loan term to profitability which measures the continuity of their business. This study is a combination of quantitative research by using statistical tests. The qualitative research through general least square (GLS) to test the variable sales to total assets and the ratio of debt to total assets. The object of research is SMEs spread across the city of Malang by viewing the source of funding and the type of financial institution that is accessible related to profitability. The sample selection using purposive sampling technique with the SME population in the city of Malang, gained as much as 62 SMEs as the sample population collected as many as 36 SMEs. The sample is an SME that is included in the population sample that met the selection criteria. The results of the analysis to model 1 shows that the profitability of SMEs in Malang influenced by the explanatory variables used in the capital structure research by 74.20% and only range of approximately line of business and the type of financial institution that became the source of acquisition of capital is not a major factor of financial performance or profitability of SMEs in Malang
