In today’s rapidly changing economic environment, improving the financial performance of small and medium-sized enterprises (SMEs) is essential, given their critical role in economic growth. Positive psychological capital has been identified as an internal resource with strong potential to enhance organizational outcomes. Yet, the processes through which it affects financial performance and the influence of managers’ financial literacy remain unclear. This study examines whether financial literacy moderates the relationship between positive psychological capital and SME financial performance. The research employed an applied, descriptive-survey design with correlational analysis. The population consisted of SME managers in the northern provinces of Iran: Gilan, Mazandaran, and Golestan. Using Cochran’s formula and stratified random sampling, 384 managers were selected, with 277 valid responses collected from October 2023 to March 2024 (72% response rate). Data were gathered using three instruments: Luthans et al.’s (2007) standardized positive psychological capital questionnaire, and two researcher-developed tools assessing financial literacy and financial performance. Structural equation modeling was conducted using SmartPLS version 3. Findings revealed a positive and significant relationship between psychological capital and financial performance (β = 0.15, p = 0.01). Each dimension—self-efficacy, hope, resilience, and optimism showed significant direct effects. Financial literacy strengthened this relationship (β = 0.07, p = 0.03), with only the financial behavior dimension acting as a significant moderator (β = 0.14, p < 0.01), while other dimensions (attitude, investment knowledge, market literacy, and regulatory awareness) were not significant. These results suggest that psychological capital is a robust predictor of SME financial performance. Moreover, financial literacy, particularly responsible behaviors such as budgeting, planning, and cash flow management, provides a vital context for converting psychological strengths into tangible financial results. The study underscores the need for integrated training programs to simultaneously enhance managers’ psychological capital and practical financial skills
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