Next Month's 132 Trillion Won Loan Maturity Puts Small Business Owners at Risk of Mass Bankruptcy

Three Already Extended Repayment for COVID Support
Ministry of SMEs "Many Bankruptcies Expected if No Further Extension"

Officials from the Solidarity of Business Owners Affected by COVID-19 held a "Shaved Head Protest by Angry Business Owners" on the 25th of last month in front of the National Assembly in Yeouido, Yeongdeungpo-gu, Seoul, urging for substantial compensation for COVID-19 damages. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporters Song Hwajeong and Kim Bokyung] "If you miss even one month’s rent, the landlord won’t just sit still. At this age, I can’t be kicked out and end up on the streets."

Mr. Kim, in his 70s, who has been running a hof (pub) in Gwanak-gu, Seoul for eight years, is struggling with debt due to the impact of the COVID-19 crisis. He said, "With daily sales of 100,000 to 200,000 won, it’s hard to cover the monthly rent of 3 million won," adding, "I have taken government support loans, bank loans, and recently even a card loan." Although he knows that taking loans lowers his credit rating, he has no choice but to endure it. Due to government quarantine measures limiting business hours to 9 p.m., customers have decreased, and it is even difficult to find part-time workers. To make matters worse, his knee health has deteriorated, but considering the loan repayments, he had no choice but to keep the business open even during the Lunar New Year holiday. Mr. Kim said, "I feel like I have to hold on until the pandemic ends," and added, "It would help if the loan maturity extension benefits were increased."

Earlier, financial authorities supported 272.2 trillion won (as of the end of November last year) through the COVID-19 financial support program involving all financial sectors since April 2020. Among this, 258.2 trillion won was extended in maturity, 13.8 trillion won had principal deferment, and 235.4 billion won had interest deferment. Currently, the outstanding balance of loan extensions and principal and interest repayment deferrals stands at 132.2 trillion won. If the loan maturity extension and interest repayment deferral measures end at the end of March, 132.2 trillion won will mature all at once.

The Ministry of SMEs and Startups expressed concerns about a wave of corporate bankruptcies and supported the need for additional maturity extensions. At a recent press briefing, Byun Taeseop, Director of the SME Policy Office at the Ministry of SMEs and Startups, said, "After extending principal and interest repayments for more than a year and a half, if the measures are shut down immediately, many companies are likely to go bankrupt," adding, "A uniform shutdown is not appropriate."

Minister Kwon Chilseung of the Ministry of SMEs and Startups also stated, "If risk assessments are conducted at the same level as before COVID-19, many companies will not be able to get loan extensions," and added, "We believe new risk assessment standards suitable for the COVID-19 situation need to be established."

Considering the difficulties faced by small business owners, financial authorities are also deliberating. Ko Seungbeom, Chairman of the Financial Services Commission, hinted at the possibility of additional extensions by stepping back from the principle of ending small business loan maturity extensions and interest repayment deferrals at the end of March. A Financial Services Commission official said, "We are currently diagnosing the management and actual conditions of small businesses and SMEs, and whether to extend further will be decided in March based on concrete statistics and the economic situation."