[Q&A] What if It Is Difficult to Provide Proof of Sales Decline for Loan Maturity Extension and Interest Repayment Deferral?

[Asia Economy Reporter Kim Hyo-jin] Small and medium-sized enterprises (SMEs) and small business owners who have suffered direct or indirect damage from the novel coronavirus infection (COVID-19) can apply for loan principal repayment extension and interest payment deferral starting from the 1st of next month.

This applies to all financial sectors including banks, insurance companies, credit finance companies, savings banks, credit unions, NongHyup, Suhyup, forestry cooperatives, and Saemaeul Geumgo. Household loans such as mortgage loans are excluded.

On the 31st, the Financial Services Commission announced financial support measures related to COVID-19 for SMEs and small business owners containing these details. Below is a summary of the main Q&A compiled by the Financial Services Commission.

◆ Can borrowers who have difficulty submitting evidence to prove sales decline or those who have been in business for a short time and do not have annual sales data receive maturity extension and interest deferral?

= If it is difficult to submit sales evidence due to reasons such as less than one year of business operation, application is possible by submitting a "COVID-19 Affected Business Management Difficulty Confirmation."

◆ Are household loans such as mortgage loans not eligible for repayment deferral?

= This measure applies only to SME loans including individual business owners and does not apply to household loans.

◆ How long does it take from application to maturity extension and interest payment deferral?

= It is generally expected to be possible within 5 business days. However, for loans requiring consent from interested parties, such as guaranteed loans, policy funds, and agreement loans, additional time may be required.

◆ Is the interest accrued during the interest payment deferral period waived?

= Interest payment deferral is not an interest waiver. Borrowers must repay the deferred interest to the financial institution after the deferral period ends, and failure to repay the deferred interest by the due date may result in delinquency or loss of the benefit of the term.

◆ Can borrowers choose how to repay the interest after the deferral period expires?

= Most financial institutions allow borrowers to choose between lump-sum or installment repayment, but in some cases, choices may be limited depending on the financial institution’s system setup.

◆ If interest payment deferral is applied for in July, is the deferral only until September?

= Interest payment deferral is possible for at least six months from the application date, so if applied for in July, deferral is possible at least until December of this year.

◆ Is it mandatory to defer principal and interest repayment for 'at least six months'?

= Borrowers can request a deferral period shorter than six months. However, unless the borrower requests a shorter period, financial institutions will grant a deferral period of at least six months.

◆ Is repayment deferral possible if the borrower is an SPC (Special Purpose Company)?

= SPCs are nominal companies without physical substance (paper companies) that do not engage in actual manufacturing or business activities and are unrelated to support for general SMEs and small business owners who have suffered real damage; therefore, they are excluded from support.

◆ Is repayment deferral possible for new loans received after April 1st?

= This measure applies only to existing loans taken out before March 31st and does not apply to new loans incurred after April 1st.

◆ Is repayment deferral possible if only the loan from the relevant financial institution applying for maturity extension and interest deferral is not delinquent?

= If loans from other financial institutions are delinquent, the borrower is excluded from support, so all loan delinquencies across all financial sectors must be resolved.

◆ Are borrowers who are already receiving support through maturity extension and interest payment deferral voluntarily implemented by financial institutions included in this application?

= Customers can compare the existing support with this new support measure and choose the more favorable option.