Machine and Aerospace Manufacturing Industry Forms 'Financial Solidarity'... Over 300 Billion KRW Support for SMEs

Support of over 300 billion KRW for Win-Win Agreement Loans, Overseas Guarantees, and Win-Win Agreement Guarantees
Establishment of 50 billion KRW Win-Win Cooperation Loan for Capital Goods such as General Machinery
Significant Expansion of Overseas Guarantee Support for Capital Goods Export Companies
Support of Win-Win Agreement Guarantees worth about 83 billion KRW for Construction Machinery and Aircraft Manufacturing Industries

[Asia Economy Reporter Moon Chaeseok] The machinery and aerospace manufacturing industries have agreed to cooperate in providing financial support of over 300 billion KRW to companies facing difficulties in funding.

The Ministry of Trade, Industry and Energy announced on the 21st that it will hold the "Machinery and Aerospace Manufacturing Financial Support Business Agreement (MOU) Signing Ceremony" at 2:30 PM at the Daejeon Chamber of Commerce and Industry.

Representatives from related companies such as Doosan Infracore, Hyundai Construction Equipment, Volvo Group Korea, Korea Aerospace Industries (KAI), Korean Air, and Hanwha Aerospace will attend the signing ceremony.

◆ 99% of Machinery and 94% of Aerospace Manufacturing Are SMEs... 'Financial Cliff' Due to Low Credit and Lack of Collateral

To overcome the funding difficulties of small and medium-sized enterprises (SMEs) and mid-sized companies in machinery and aerospace manufacturing, a financial support program worth 300 billion KRW will be unveiled, and a related MOU will be signed.

The machinery industry consists of 99% SMEs, and the aerospace manufacturing industry is composed of 94% SMEs, making them order-based industries. The depletion of order volumes and a sharp decline in new orders inevitably cause significant financial impacts on SME and mid-sized partner companies.

Many companies face difficulties using financial support programs due to low credit ratings, lack of collateral, and guarantee limits in the financial sector, making support measures urgently needed.

Accordingly, the industry has prepared financial support programs worth about 300 billion KRW, including ▲ establishment of win-win agreement loans ▲ expansion of overseas guarantees ▲ establishment of win-win agreement guarantees.

◆ Large Corporations Provide Customized Loans and Guarantees for SMEs... 'Financial Solidarity'

Source: Ministry of Trade, Industry and Energy

First, a total of 50 billion KRW in win-win agreement loans has been newly established. The Capital Goods Mutual Aid Association will deposit 50 billion KRW with the Industrial Bank of Korea (IBK).

IBK will provide loans with a preferential interest rate of 1.2 percentage points plus alpha (α) to machinery industry SMEs and mid-sized companies that have suffered direct or indirect damage due to the spread of COVID-19. Each company can use the preferential interest rate loan up to a maximum of 500 million KRW.

Member companies engaged in general machinery industries (Standard Industry Classification Code C29) and other machinery industries such as metal products and electrical machinery can use this loan program.

The overseas guarantee program will be expanded to a maximum scale of 200 billion KRW to overcome the overseas order cliff in the machinery industry. This includes bid guarantees, contract performance guarantees, and advance payment refund guarantees required by ordering parties when signing overseas contracts.

Last year, 68.1 billion KRW in overseas guarantees was operated for members. This will be increased to a maximum of 200 billion KRW to respond to strengthened ordering party requirements due to COVID-19 and to prepare for an increase in overseas project orders with future economic recovery.

Additionally, a total of 83.25 billion KRW in win-win agreement guarantees will be provided. Six primary contractors in construction machinery and aerospace manufacturing will contribute 5.55 billion KRW to the Korea Technology Finance Corporation (Kibo).

In construction machinery, Doosan Infracore will contribute 1 billion KRW, Hyundai Construction Equipment 1 billion KRW, and Volvo Group Korea 250 million KRW. In aerospace manufacturing, Korea Aerospace Industries will contribute 2 billion KRW, Korean Air 1 billion KRW, and Hanwha Aerospace 300 million KRW.

Kibo will provide preferential guarantees to partner companies recommended by the primary contractors. The guarantee ratio will be increased from 85% to 100%, and the guarantee fee will be reduced by 0.3 percentage points.

◆ Partner Companies: "We Will Use Financial Support as a Stepping Stone for Swift Recovery"

[Image source=Yonhap News]

The Mutual Aid Association and IBK will sign the "Win-Win Agreement Loan Agreement for Overcoming the COVID-19 Crisis and Supporting the Machinery Industry" and announce the launch of the 50 billion KRW win-win agreement loan.

Son Dong-yeon, Chairman of the Association, and Seo Jeong-hak, Vice President of IBK, pledge to actively support machinery companies that have suffered direct or indirect damage due to the spread of COVID-19 to help overcome the crisis.

Primary contractors and related organizations participating in the event reaffirm their commitment to overcoming the crisis together with SMEs and mid-sized companies through the spirit of solidarity and cooperation despite difficult times.

Representatives of small partner companies such as Korea Bonsan and Woojin Plime express their expectations for the financial support program and state their intention to use it as a stepping stone to quickly recover from the slump.

Seong Yun-mo, Minister of Trade, Industry and Energy, said, "I deeply appreciate the companies, associations, and related organizations that actively supported funding for SMEs and mid-sized companies with the spirit of solidarity and cooperation," adding, "The government will also continue to communicate with the industry and contribute to overcoming the crisis."

Meanwhile, along with the financial support MOU signing ceremony, awards will be presented to eight representatives among 33 individuals and 16 companies recognized for their contributions to pioneering global markets and developing domestic technologies in the machinery and robotics capital goods sector.

In particular, Lee Won-hae, Chairman of Daemo Engineering, will be honored with the Gold Tower Order of Industrial Service Merit for achievements including the development of the world's first intelligent construction heavy equipment attachment technology.