Loan interest rates from 0.8% to 2.0% with a groundbreaking
fund size of 3 billion to 30 billion KRW by autonomous district
Seoul Digital Industrial Complex panorama.
Kim Jaeyoung (55, pseudonym), who runs a small business in Seoul Digital Industrial Complex (G-Valley), recently applied for loan support at the district office. Facing tight financial conditions, he hurried to apply after hearing that the loan interest rate was low and that funds could be used stably for about 4 to 5 years. Kim said, “There has been a severe drought of money recently, but if I can get the loan, it will surely act like a timely rain.”
Loan support from the ‘Small and Medium Enterprise Development Fund’ operated by each autonomous district in Seoul is popular. Although collateral or guarantees are required, so the loan threshold is not significantly lowered, the attractive point is the exceptionally low interest rates offered even to small and medium enterprises or small business owners with relatively low credit ratings. Due to the economic downturn, applications have increased this year.
Geumcheon-gu Interest Rate 0.8%, Gangseo-gu Up to 300 Million KRW
Geumcheon-gu has decided to lend a total of 5 billion KRW this year. Applications are accepted until the 21st of this month from small and medium enterprises (manufacturing, knowledge industry, information and communication industry, social economy enterprises) or small business owners with their main office or business site in Geumcheon-gu.
The loan interest rate, which was 1.5% last year, has been lowered to 0.8% this year. The 0.8% interest rate corresponds to the bank fee level for district office administrative services. Instead, to allow more companies to benefit from the loan, the support limit per company was reduced by 50 million KRW from last year to 100 million KRW. Collateral capability according to the credit regulations of Woori Bank Geumcheon-gu Branch is required, and applicants must not have received support within the last five years.
Last year, Geumcheon-gu lent 4.905 billion KRW to 35 small and medium enterprises. A representative from Geumcheon-gu’s local economy department explained, “Last year, 220 companies applied, but after reviewing the requirements, only 35 companies were selected as support targets. We lowered the loan interest rate further, and since the industrial complex’s economic situation is tough, we expect more applications this year.”
Gangseo-gu, which accepts applications year-round, will lend a total of 6 billion KRW this year at an interest rate of 1.5%. Small and medium enterprises can apply for up to 300 million KRW per company. A representative from Gangseo-gu’s local economy department said, “Perhaps due to the economic situation, the application speed this year seems twice as fast as last year. Although applications are accepted anytime, it is better to apply early.”
Among the 25 autonomous districts, Gangnam-gu has the largest fund scale and will provide 12 billion KRW in loan support in the first half of this year alone. Last year, it supported a total of 30 billion KRW, with 20 billion KRW in the first half and 10 billion KRW in the second half. The interest rate was 0.8% last year but has been raised to 2.0% this year.
A representative from Gangnam-gu’s local economy department said, “During the difficult times for small and medium enterprises and small business owners due to COVID-19, we increased the loan support amount and significantly lowered the interest rate. We adjust the loan scale and interest rate according to the situation.” In Gangnam-gu, competition was fierce last year with 1,300 applications received in the first half and 450 loans executed.
Loan Amount and Interest Rate Decided by District Mayor, Fund Managed by Development Fund Deliberation Committee
In areas without industrial complexes or with dense residential areas, many applications come from self-employed and small business owners. Nowon-gu and Jongno-gu are representative examples. Jongno-gu plans to lend 1.5 billion KRW each in the first and second halves of this year, totaling 3 billion KRW. Applications are accepted from the 22nd of last month until the 8th of this month.
A representative from Jongno-gu’s Small Business Support Team said, “We estimate about 65,000 small business owners (places) in the district and actively promote the fund loan details through district newsletters and community service centers.”
Nowon-gu also increased the fund loan amount by 1 billion KRW from last year and plans to support a total of 3 billion KRW with 1.5 billion KRW each in the first and second halves of this year.
The Small and Medium Enterprise Development Fund is established by basic local governments based on the ‘Local Autonomy Act,’ the ‘Act on the Promotion of Small and Medium Enterprise Development and Innovation,’ and the ‘Act on the Promotion of Venture Investment,’ through enacting the ‘Ordinance on the Establishment and Operation of Small and Medium Enterprise Development Funds.’ The annual loan amount, interest rate, and other conditions are decided by the district mayor, but the overall fund operation, including the selection of support targets, is reviewed by the Development Fund Deliberation Committee composed of local business groups, management councils, and related experts.
Applications and reception for the development fund are sometimes handled by the local economy departments of each district office, but in some cases, the credit screening work is conducted by the district treasury bank branch or the Seoul Credit Guarantee Foundation. It is advisable to inquire in advance through the district office website or the relevant local economy department before applying for the fund.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
