'High Interest to Low Interest'... Small Business Debt Refinancing Loan Applications Open from the 29th

The Korea Federation of Foodservice Industry and 13 other self-employed organizations formed the Corona Victims Self-Employed General Federation (Coja Federation), holding a protest rally last February at the Gwanghwamun Citizen Open Square in Seoul.

[Asia Economy Reporter Donghyun Choi] A 'debt refinancing loan' program for small business owners and self-employed individuals who have been diligently repaying their debts despite high interest rates is set to be launched in full swing.

The Ministry of SMEs and Startups announced that starting from the 29th, it will implement the 'Small Business Owner Debt Refinancing Loan,' which converts high-interest loans from non-bank sectors into low-interest policy funds. The Small Business Owner Debt Refinancing Loan is part of the KRW 8.7 trillion out of the KRW 62 trillion second supplementary budget confirmed on May 29. Among this, the Ministry of SMEs and Startups will prioritize selecting low-credit small business owners with a budget of KRW 200 billion and officially start the refinancing loan program from this day. The remaining KRW 8.5 trillion refinancing loans will be implemented in September.

The beneficiaries of this refinancing loan are low-credit small business owners who urgently need refinancing due to debt repayment burdens. The criterion for low credit is a NICE Credit Information personal credit score (NCB) of 744 points (bottom 20%) or below. The program proceeds as a loan without separate guarantees until the budget is exhausted.

Any low-credit small business owner who has been faithfully repaying high-interest loans of 7% or more annually from non-bank sectors before May 31 is eligible to apply. However, loans taken from private lenders are excluded. Additionally, companies with tax arrears, loan delinquencies at financial institutions, credit information registration issues, temporarily closed or closed businesses, and industries excluded from small business policy fund loans are also not eligible.

The loan amount is recognized up to a maximum of KRW 30 million. However, the number of refinancing loan cases does not matter. For example, if a low-credit small business owner has taken high-interest loans of 7% or more from three non-bank institutions amounting to KRW 20 million, KRW 6 million, and KRW 4 million respectively, all three cases are recognized since the total is below KRW 30 million.

Interest rates are applied differentially within the range of 5.5% to 7.0% depending on creditworthiness. The loan period is five years, with a two-year grace period followed by three years of installment repayment.

Applications can be made from this day by issuing a ‘Small Business Owner Debt Refinancing Loan Eligibility Certificate’ online on the Small Business Policy Fund website, then visiting one of the 1,274 branches nationwide of Shinhan Bank and Hana Bank, which have signed agreements. More detailed information can be found on the Small Business Policy Fund website. Guidance is also available through bank call centers, the Small and Medium Business Integrated Call Center, and 77 regional centers of the Small Enterprise and Market Service.

Won Young-jun, Director of Small Business Policy at the Ministry of SMEs and Startups, stated, “We hope this refinancing loan will help alleviate financial difficulties for small business owners who have been struggling by taking out non-bank loans due to financial hardships caused by COVID-19.”