Purpose The purpose of this study is by drawing on signaling theory to address the need for more investigation into the conceptual underpinnings of sponsorships by investigating and seeking to understand sponsorship objectives, opinions and practices, with a focus on smaller organisations. Design/methodology/approach This empirical study contributes to the literature through researched findings from German respondents and a critical evaluation of literature relating to the impact of sports sponsorship on SMEs within local German communities. Findings Drawing on signalling theory and extant studies, the following four categories of SME sport sponsorship activities are proposed: value-based connections, social engagement, recognition and bonding. Research limitations/implications Sponsor, sponsee and dyadic antecedents have increased in both sophistication and complexity, resulting in expected positive consumer outcomes as the justification for marketing communication investments. Practical implications Sponsorship has evolved from short-term philanthropic activities to long-term strategic alliances involving billions of dollars of annual spending globally. Social implications SME companies have certain local opportunities that larger multinational corporations cannot replicate. Originality/value No study to date has provided researchers with a framework to understand sports sponsorship from an SME perspective. This paper contributes to the theories and practice of sport sponsorship, drawing on signalling theory and extant studies.