Up to 1.5 Million Won Refund for Small Business Owners
Some Sectors Like Real Estate Rental Excluded
400,000 Beneficiaries... Payment Made Quarterly Upon Application
Starting from the end of March, interest refunds (cashbacks) for small business borrowers will also begin in the small and medium financial sectors, including savings banks, mutual finance, and specialized credit finance companies.
The Financial Services Commission announced on the 31st that from March 29, interest refunds will commence quarterly for borrowers who took out business loans from small and medium financial institutions. These institutions will refund a portion of the interest paid by eligible borrowers, and the Small and Medium Business Corporation will cover the refund amount from the allocated budget of 300 billion KRW.
The eligible recipients are individual business owners and small corporations holding business loans with interest rates between 5% and less than 7% from small and medium financial institutions as of December 31 of last year. Certain industries, such as real estate rental businesses, are excluded from support. The estimated number of beneficiaries is approximately 400,000.
The maximum loan amount eligible for interest support is 100 million KRW. The amount each borrower can receive varies depending on the interest rate bracket. Borrowers with existing rates between 5.0% and 5.5% will receive a uniform 0.5 percentage point refund, those with rates between 5.5% and 6.5% will receive a refund reflecting the difference between their rate and 5%, and borrowers with rates between 6.5% and 7.0% will receive a uniform 1.5 percentage point refund. According to these criteria, the maximum refund amount per person is 1.5 million KRW.
Unlike the banking sector where cashback is automatic without any application, interest refunds in the small and medium financial sectors are paid only when the borrower applies, on each quarter-end date (March 29, June 28, September 30, December 31). Borrowers who have paid interest for more than one year as of the quarter-end date will receive a lump sum refund for one year’s worth of interest. For example, borrowers whose loan contract period has not exceeded one year before the first refund date (March 29) will receive the refund amount on the upcoming quarter-end date (June 28) after paying one year’s interest.
The Financial Services Commission expects that if all eligible borrowers apply, approximately 240,000 small business owners (60% of beneficiaries) will receive a total of 180 billion KRW, averaging 750,000 KRW per person, on March 29.
Currently, the Financial Services Commission and the Ministry of SMEs and Startups are preparing to ensure smooth operation of the program. Considering borrowers with multiple debts, online applications will be handled by the Credit Information Agency, and offline applications will be accepted by each financial institution. A financial authority official stated, "We are currently building the IT system with related agencies to receive interest refund applications from borrowers around mid-March and to disburse funds," adding, "Detailed information will be provided in early March."
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