Second Financial Support Program Interest Rate Reduced to 2% Range Annually
[Asia Economy Reporter Kangwook Cho] Small business owners renting premises in restricted gathering industries can receive additional loans of up to 10 million KRW starting today. Additionally, the small business owners' second loan program will be available at a reduced annual interest rate in the 2% range compared to before.
According to the financial sector on the 18th, the Financial Services Commission will launch a special loan program from today, prepared through joint consultations with banks in response to strengthened government and local government quarantine measures due to the third wave of the novel coronavirus infection (COVID-19) and prolonged financial difficulties.
Accordingly, small business owners renting premises in restricted gathering industries will be able to receive an additional loan of up to 10 million KRW separately. The support targets are small business owners (individual business operators) in restricted gathering industries who are eligible to apply for 2 million KRW from the Support Fund, which began disbursement on the 11th.
Individual business owner small business operators currently under lease contracts can apply for an additional loan of up to 10 million KRW regardless of whether they have used existing small business financial support programs.
Restricted gathering industries include five types under social distancing level 2: restaurants and cafes, indoor sports facilities, karaoke rooms, direct sales promotion centers, and standing performance venues. Under social distancing level 2.5+α, there are 11 types: restaurants and cafes, beauty salons, PC rooms, arcades and multi-rooms, study cafes, movie theaters, amusement parks, large marts and department stores, and lodging businesses.
Interest rates are expected to be in the 2% range for major commercial banks and between 2% and 3% for others. The guarantee fee will be fully waived for the first year of the 5-year loan period (2 years grace period, 3 years installment repayment), and a fixed 0.6% guarantee fee rate will apply from the 2nd to 5th years.
Tenant small business owners can receive additional loans from 12 commercial and regional banks currently operating the second loan program. The 12 banks are Kookmin, Nonghyup, Shinhan, Woori, Hana, Industrial Bank of Korea, Gyeongnam, Gwangju, Daegu, Busan, Jeonbuk, and Jeju Banks.
In addition, the maximum interest rate for the small business owners' second loan will be reduced by up to 2 percentage points from applications received starting today.
Previously, the banking sector lowered the maximum interest rate by 1 percentage point from 4.99% to 3.99% on December 29 last year. Especially with this revision, Kookmin, Shinhan, Woori, Hana, Nonghyup, and Industrial Bank of Korea plan to further reduce the rate by 1 percentage point to operate at interest rates in the 2% range.
The guarantee fee for the first year of the 5-year loan period (2 years grace, 3 years installment repayment) will be lowered by 0.6 percentage points from the previous 0.9% to 0.3%. The rate for the 2nd to 5th years remains at 0.9%.
The second loan allows all small business owners to borrow up to 20 million KRW. However, corporate business operators and small business owners who have used more than 30 million KRW in the first financial support programs (Industrial Bank of Korea ultra-low interest loans, commercial banks' secondary interest subsidy loans, Small Enterprise and Market Service management stabilization funds) are excluded from eligibility.
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