[Reporter’s Notebook] Debt Restructuring Loans That Make Self-Employed Suffer Twice

Self-employed workers holding a rally near the Presidential Office in Yongsan-gu, Seoul.

[Asia Economy Reporter Choi Donghyun] The Ministry of SMEs and Startups began accepting applications for 'debt refinancing loans' for low-credit self-employed individuals and small business owners from 9 a.m. on the 29th of last month, three days ago. Debt refinancing loans are a system that converts high-interest loans from non-bank sectors into low-interest policy funds. However, due to stringent application conditions and a weekly applicant limit that was not previously disclosed, many small business owners are experiencing 'false hope.'

A self-employed person engaged in clothing wholesale in Seoul delayed opening their store briefly on the day the debt refinancing loan was implemented and sat at their computer. To apply for the debt refinancing loan at a bank, they needed to obtain a 'support eligibility confirmation' from the Small Business Policy Fund website. Around 10 a.m., when they tried to print the confirmation, they were disheartened to see a notice that issuance had ended. Online communities with over one million small business owners were filled with similar cases.

When inquiring with the Small Enterprise and Market Service under the Ministry of SMEs and Startups, which operates the debt refinancing loan, they stated, "Issuance of the debt refinancing loan confirmation is limited on a weekly basis (Friday to the following Thursday)." The weekly issuance limit was not mentioned in any materials or announcements distributed to the media before the system was implemented. Regarding the reason for the limit, the Small Enterprise and Market Service explained, "It is to prevent an increase in bank workload." When asked about the exact number of weekly issuances, they replied, "This information is not disclosed externally," but added, "It is roughly in the several thousands." After a flood of inquiries from self-employed individuals who could not obtain the confirmation, the Small Enterprise and Market Service belatedly posted a notice on their system stating that weekly applications had closed and that applications for the next week would resume at 9 a.m. on the 5th. While the Ministry of SMEs and Startups can limit the number of applications per week and continue policy promotion for a long time, self-employed individuals must wait in vain during this period for a possible debt refinancing loan and bear high interest rates.

The application conditions are as difficult as passing through the eye of a needle. Loans from private lenders are excluded, as are businesses with tax arrears, overdue loans from financial institutions, credit information registration, businesses that are temporarily closed or shut down, and industries excluded from small business policy fund loans. Furthermore, only those who have received business loans, not secured loans or personal credit loans, are eligible. In some ways, the controversy caused by this debt refinancing loan is similar in context to the ongoing issue of the 'blind spots in small business loss compensation.' Policies need to be more closely aligned with the realities of self-employment.