Incheon City to Provide 1.2 Trillion Won in Funding Support Including Interest Differential Compensation to SMEs This Year

[Asia Economy Reporter Park Hyesook] Incheon City announced on the 16th that it will support nurturing funds worth 1.195 trillion KRW this year to help small and medium-sized enterprises (SMEs) struggling with the three highs (high inflation, high interest rates, and high exchange rates).

This amount is 155 billion KRW more than last year's support amount of 1.04 trillion KRW.

By support category, the funds include ▲interest rate differential compensation of 960 billion KRW ▲accounts receivable insurance of 160 billion KRW ▲agreement guarantee support of 40 billion KRW ▲structural advancement funds of 35 billion KRW.

Interest rate differential compensation is a project that supports part of the bank interest to reduce the burden of rising interest expenses for companies as loan variable interest rates have recently surged sharply.

Accounts receivable insurance is insurance that compensates part of the losses caused by the debtor's default to prevent chain bankruptcies such as profitable bankruptcies.

Agreement guarantee support is a project that helps companies with weak collateral ability receive financial support from financial institutions by evaluating intangible technology through a 100% guarantee ratio agreement with the Korea Technology Finance Corporation, the first of its kind among local governments.

Structural advancement funds provide loans for machinery purchase and factory acquisition to improve productivity and establish a production base in manufacturing.

The city increased the amount of nurturing funds for SMEs this year compared to last year and also expanded the scope.

In the case of interest rate differential compensation, the support limit was raised to up to 200 million KRW for micro-enterprises regardless of sales, and for companies excelling in job creation, the limit was increased from 5 billion KRW to 5.5 billion KRW.

Also, for structural advancement funds, the support limit for disaster-affected companies was increased from 200 million KRW to 300 million KRW per company, and to encourage facility investment by SMEs, funds will be provided even when factories are newly built or expanded, making factory acquisition easier.

The target recipients of the SME nurturing funds are manufacturing, manufacturing-related service industries, construction, trade, tourism, and chartered bus transportation companies with business sites in Incheon.

Meanwhile, according to the "Survey Data on the Impact of COVID-19 on the Incheon Economy" released by the Bank of Korea Incheon Branch, the number of marginal companies (companies struggling due to poor financial structure) among SMEs in Incheon increased by 2.8 percentage points from 11.9% in November 2019 before COVID-19 to 14.7% last year due to the increased interest repayment burden caused by rising loan interest rates.