[Report] "Interest Rates Higher Than 1st Round..." Quiet Counters on First Day of Corona 2nd Loan (Comprehensive)

On the First Day of Small Business Loans at Banks
There Were Inquiries About Limit Increases
Contrasting with the First Round of Financial Support

On the 23rd, the second loan limit for small business owners struggling due to the COVID-19 crisis will be increased to 20 million won. Small business owners who have already received the first loan can also apply for additional loans. According to the Financial Services Commission, the government has expanded the support limit and scope through the 'Expansion and Reorganization of the Small Business Financial Support Program' to provide up to 20 million won in additional support to small business owners. The photo shows a small business owner receiving loan consultation at Shinhan Bank in Seoul on the same day. Photo by Moon Honam munonam@

[Asia Economy reporters Kangwook Cho, Sunmi Park, Minyoung Kim] "I came out because the interest rate on the second loan for small business owners has decreased compared to the first time. I don't know how it will actually be, but since every day is urgent, I guess I have to take it for now."

At around 9:30 a.m. on the 23rd, self-employed Kim Hyunjung (alias, 47), whom we met at Bank A located on Sogong-ro, Jung-gu, Seoul, sighed and said this. Kim said, "This is all debt, but I am worried because the interest rate is higher than the first loan."

Around the same time, Lee Jinkyung (alias, in her 60s), whom we met at Bank B Dong-Yeouido branch, said, "I took the first loan, but it was just a temporary fix," adding, "I don't know when the COVID-19 situation will end, but as the debt increases and I keep juggling it here and there, I don't know if I will be able to get this second loan due to my credit rating."

Bank counters in major commercial districts in Seoul are quiet... steady phone inquiries only

On the first day of implementing the supplementary measures for the 'Second Financial Support Loan for Small Business Owners' in response to COVID-19, bank counters in major commercial districts in Seoul were quieter than expected. Although each bank branch opened dedicated counters for loans to small business owners affected by COVID-19, few people visited these counters. This contrasts sharply with the first financial support, when each bank branch was crowded. It is interpreted that this is partly because it is the first day and publicity is insufficient, and partly because the lower loan limits and higher interest rates compared to the first time are the reasons.

A representative from Bank C Dong-Yeouido branch said, "Since it is the first day of the loan limit increase, it seems that customers are not flocking," but added, "Some customers came in person yesterday to inquire about the required loan documents, but the atmosphere is clearly different from the first loan."

However, phone inquiries for loan consultations were steadily coming in. A representative from Bank D said, "Many customers who previously applied for 10 million won in the second loan are calling to ask if they can increase their limit to 20 million won," adding, "There are also steady inquiries about withholding existing loan approvals and reapplying."

Second financial support for small business owners neglected... questions about effectiveness despite increased limits and lowered interest rates

The biggest change in the COVID-19 response 'Second Small Business Financial Support Program Version 2.0,' which started operating from this day, is that the loan limit has increased from the previous 10 million won to 20 million won. Even borrowers who have already received 10 million won through the second small business loan that started in May can apply for an additional 10 million won. Borrowers who took the first small business loan can also use the second loan program concurrently. However, only small business owners who used the first loan within 30 million won can apply for the second loan. If a small business owner with a credit rating of 1 to 3 has never used small business loans including the first and second loans, they can apply for 30 million won in market bank interest subsidy loans and 20 million won in this second small business loan at once, receiving a total of 50 million won.

The background for the release of 'Version 2.0' is that the second financial support program, which started in May, was thoroughly neglected by small business owners. Not only was the loan support amount low, but the interest rate was more than twice as high as the 1.5% of the first loan. As a result, 9.34 trillion won out of the 10 trillion won limit remained unused.

The interest rate of this supplementary measure has decreased compared to the launch time. This is because commercial banks lowered the interest rates reflecting the purpose of supporting small business owners and market interest rates. The interest rates of the five major banks dropped from 3.52-4.99% at the launch in May to 2.40-4.99% as of the 8th. However, unless the interest rate of the second loan is drastically lowered to the 1% level of the first loan, its effectiveness is expected to be limited. In the ongoing COVID-19 situation, the high credit rating requirement is a hurdle, and loans rather than support inevitably remain a burden.

Calls for fundamental measures such as rent adjustment

Seong Jaeho (alias, 39), who runs a small pub in Seongnam, Gyeonggi Province, said, "If the loan is extended, it eventually has to be repaid, but there is no guarantee that the business will normalize after COVID-19, so it feels bleak," adding, "It would be better to have some practical support such as rent adjustment or at least reduce taxes for business owners, and establish fundamental measures."

Another self-employed person, Cha Jinsu (alias, 47), said, "They say I can't get it because I have a large existing loan amount and low credit, but if there is a clear drop in sales, shouldn't everyone get this loan?" He pointed out, "Even if I take out 20 million won this time, I don't know how many months I can survive, so if this is called support, a more definite plan is needed."