Small Business Owners' 'Jiyeok Shinbo' Guarantee... Triple Support Effect on Supply Amount

Business Difficulties Worsened by COVID-19
Need to Increase Supply Scale

[Asia Economy Reporter Kim Daeseop] As the need for policy financial support for small businesses and micro-enterprises related to the novel coronavirus infection (COVID-19) has increased, it has been analyzed that the guarantee supply amount of 16 regional credit guarantee foundations nationwide produces an effect of inducing production and creating added value that is three times the amount. The importance of increasing the scale of guarantee supply and establishing efficient support policies for small businesses and micro-enterprises facing difficulties such as economic recession, sluggish domestic demand, and rising costs has grown.

According to the "2019 Small Business and Micro-Enterprise Credit Guarantee Support Effect Analysis Report" by the Korea Credit Guarantee Fund on the 17th, the total guarantee supply amount invested in the small business and micro-enterprise market last year recorded 8.5169 trillion KRW. The report estimated the production inducement effect at 16.0933 trillion KRW and the added value inducement effect at 7.0981 trillion KRW accordingly.

Last year's guarantee supply amount increased by 1.7795 trillion KRW from 6.7374 trillion KRW in 2018. The number of companies receiving guarantees also rose from 261,300 in 2018 to 327,843 in 2019. The guarantee supply was found to have created employment outcomes. The report identified that the guarantee supply last year induced employment for 84,280 people.

The Korea Credit Guarantee Fund is a public institution under the Ministry of SMEs and Startups that provides guarantees to small businesses and micro-enterprises to help with financing. It operates guarantee support and related tasks through 16 regional credit guarantee foundations nationwide. This report was produced based on a survey of 3,047 small businesses and micro-enterprises that used guarantees from regional credit guarantee foundations.

The business management difficulties cited by small businesses and micro-enterprises (multiple responses allowed) showed 'decreased sales' as the highest at 55.1%. This was followed by 'fundraising' (29.3%), 'securing manpower and rising labor costs' (28.1%), 'intensified competition' (21.3%), and 'rising raw material prices' (14.3%).

The main purpose of fundraising through credit guarantees was 'working capital' at 68.6%, followed by 'startup capital preparation' (16.1%) and 'facility investment' (10.7%). Regarding the time required for the guarantee support effect to occur, responses were 'within 6 months to 1 year' (41.5%) and 'within 6 months' (33.2%).

Among the guarantee support tasks for small businesses and micro-enterprises, the most needed improvement was 'expansion of support amount' at 48.7%. Next were 'reduction of guarantee fees' (21.4%), 'prompt support' (7.8%), 'expansion of support targets' (7.7%), and 'relaxation of qualification requirements' (7.5%).

The use of guarantees through regional credit guarantee foundations is helping improve the management of small businesses and micro-enterprises. Considering that small businesses and micro-enterprises cite the expansion of support amounts as the biggest area for improvement in guarantee support tasks, continuous guarantee support as well as measures to expand policy funds are necessary.

In particular, due to the recent COVID-19 situation, the management difficulties of small businesses and micro-enterprises have increased further. According to the "COVID-19 Related Micro-Enterprise Survey" announced by the Korea Federation of Micro Enterprises on the 11th, 97.9% of respondents answered that their business sales decreased after the outbreak of COVID-19.

Kim Byung-geun, Chairman of the Korea Credit Guarantee Fund, said, "The Korea Credit Guarantee Fund and regional credit guarantee foundations will continue to provide substantial policy support to improve the management conditions of small businesses and micro-enterprises. We will identify the difficulties faced by micro-enterprises and strive to ensure that regional credit guarantee foundations can perform their core mission of guarantee services both qualitatively and quantitatively."