[Asia Economy Reporter Song Hwajeong] The government will provide customized policy funds totaling KRW 41.2 trillion over two years to supply liquidity, enhance competitiveness, and support the recovery of self-employed individuals and small business owners.
On the 24th, the Financial Services Commission announced a plan to supply customized policy funds for self-employed individuals and small business owners. This is part of the previously announced KRW 80 trillion comprehensive support plan tailored for the self-employed and small business owners. The government will supply KRW 41.2 trillion in liquidity and competitiveness enhancement support funds to borrowers with repayment ability and offer low-interest refinancing products worth KRW 8.5 trillion to borrowers struggling with high-interest burdens. Additionally, for borrowers who find repayment difficult on their own, the government will provide debt adjustment support such as principal and interest reduction through a KRW 30 trillion fresh start fund.
The KRW 41.2 trillion customized fund support includes ▲KRW 10.5 trillion for liquidity supply ▲KRW 29.7 trillion for competitiveness enhancement ▲KRW 1 trillion for recovery support.
First, to supply liquidity to self-employed individuals and small business owners, KRW 10.5 trillion in new funds will be provided through COVID-19 special guarantees and interest burden reduction programs. This consists of KRW 7.2 trillion in loans and KRW 3.3 trillion in guarantees. Approximately KRW 5.4 trillion will be allocated to support self-employed and small business owners affected by COVID-19. KRW 3.25 trillion will be supplied as special guarantees by the Korea Credit Guarantee Fund (KODIT) to businesses directly impacted by COVID-19. Eligible recipients include small enterprises and small business owners affected by COVID-19, as well as medium-sized enterprises with sales under KRW 5 billion. The fund limit is KRW 300 million per company for working capital, supported within the scope of facility capital needs, with a 0.5 percentage point reduction in guarantee fees and a 90% guarantee ratio applied. KRW 2.1 trillion will be supplied by the Industrial Bank of Korea (IBK) and KODIT to companies requiring funds due to other sales declines or deteriorating financial conditions.
To enhance the support effect of the High Credit Hope Loan Plus introduced in January for COVID-19 affected companies, the support limit and target will be expanded. The High Credit Hope Loan Plus had a limited loan ceiling of KRW 10 million and was restricted to recipients of quarantine support funds, limiting demand. Therefore, the support limit will be increased from KRW 10 million to KRW 30 million, and recipients of loss compensation funds will be added to the eligible targets.
To reduce the financial burden on struggling self-employed individuals and small business owners, IBK will reorganize and establish a loan interest rate reduction program. The Haenaeri Loan, an exclusive program for micro small business owners, will be increased from KRW 4 trillion to KRW 7 trillion, adding KRW 3 trillion in supply. Companies affected by COVID-19 and those that have received consulting from the Small Enterprise and Market Service will receive interest rate benefits of up to 1.2 percentage points. A fixed interest rate special support of KRW 1 trillion will be promoted to alleviate the burden of rising interest rates by providing a 1 percentage point interest rate discount on fixed-rate loans. For cases where credit ratings have temporarily declined or sharply dropped but are deemed recoverable, interest rate benefits of up to 3 percentage points (average 1.3 percentage points) will be provided.
For micro self-employed individuals who find it difficult to leave their business premises, KRW 100 billion in non-face-to-face loans will be supplied using the IBK and KODIT computer systems.
To strengthen the competitiveness of self-employed individuals and small business owners, KRW 29.7 trillion in new funds will be supplied for start-ups, business expansion, and facility investment. First, IBK will supply KRW 18 trillion in funds for start-up capital and facility investment through business stabilization for low-credit micro small business owners. KODIT will support guarantees for KRW 11.3 trillion in working and facility capital tailored to the characteristics of self-employed individuals and small business owners, such as start-ups, business expansion, and service industry operations. Additionally, to support companies struggling to secure raw materials due to recent inflation, IBK, KODIT, and the Korea Technology Finance Corporation (KOTEC) will provide raw material purchase funds. For platform-registered businesses lacking financial history, KRW 100 billion in guarantees will be supplied using platform data (by IBK and KODIT).
To support the recovery of self-employed individuals and small business owners, KRW 1 trillion in new funds will be supplied to support re-startups and business type changes. KRW 220 billion in special guarantees by KODIT will be provided to companies that have closed due to management difficulties and are re-starting or preparing to change their current business or industry. IBK will introduce a re-startup preferential program offering up to a 1.2 percentage point interest rate reduction worth KRW 100 billion to support early settlement for re-startups within five years of closure. Furthermore, funds for re-leaping will be supported after repayment ability assessments for companies with long-term sales and financial deterioration or those that have undergone debt adjustment.
The funds required for these supports will be supplied with KRW 3.25 trillion from the COVID-19 special guarantees funded by supplementary budgets (KRW 220 billion), and the remaining KRW 38 trillion will be supplied from KODIT and IBK’s own resources.
Most funds, including COVID-19 special guarantees, will be implemented from the 25th. The High Credit Hope Loan Plus system reform, Haenaeri Loan interest rate benefit expansion, and non-face-to-face programs requiring computer system upgrades will be implemented from the 8th of next month. Guarantees for platform-registered businesses are scheduled to be implemented by December this year after consultations with related agencies and the establishment of loan and guarantee models.
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