Second Financial Sector Small Business Interest Support 'Application Procedure' to Be Released Early Next Week

Apply online or offline at savings banks and Saemaeul Geumgo for refunds
Over 10,000 units including cooperatives... Financial Services Commission consults with financial institutions, central associations, and credit information agencies
Utilizing 300 billion KRW from the Small and Medium Venture Business Startup and Promotion Fund
Up to 1.5 million KRW refund per borrower expected... Lump-sum payment every quarter

The financial authorities will disclose the specific procedures next week for refunding part of the interest payments to small business owners who took out high-interest loans with rates between 5% and 7% from small financial sectors such as savings banks and mutual finance institutions. This comes as the first phase of interest cashback amounting to 1.36 trillion KRW from commercial banks was completed last month, and support through small financial sectors is now being actively initiated.

According to the financial authorities on the 5th, the Financial Services Commission will announce next week the preliminary application procedures to provide partial interest support for individual business owners and small corporate enterprises holding business loans with interest rates of 5% or higher but less than 7% as of the end of last year from savings banks, mutual finance (Nong, Su, and Shin cooperatives, forestry cooperatives, Saemaeul Geumgo), and credit finance companies (card companies, capital companies).

Since announcing the 'Three-Set Package to Reduce Interest Burden for Small Business Owners' in January, the Financial Services Commission has been negotiating with various stakeholders for a month to establish an interest support system through small financial sectors. A Financial Services Commission official explained, "There are about 10,000 related entities including savings banks, mutual finance, associations, and central organizations, so the consultations took considerable time," adding, "Education on this policy and procedures was also conducted down to the unit cooperatives."

Unlike the banking sector, the interest support program in the small financial sector requires borrowers to apply either online or offline for interest payments to be made. This is because consent to provide information is necessary to share borrower information with the Small and Medium Business Corporation.

In particular, this program involves multiple entities such as small financial companies, associations/central organizations, the Small and Medium Business Corporation, and the Credit Information Agency working in an integrated manner. Once the borrower's application is completed, from the end of March, small financial institutions will refund part of the interest paid by eligible borrowers, and the Small and Medium Business Corporation will reimburse the financial institutions for the total refunded amount as financial support.

A Financial Services Commission official said, "There are online application procedures built by the Credit Information Agency and offline application procedures through small financial companies," adding, "Once the small financial companies complete the interest support, the Small and Medium Business Corporation and associations/central organizations will sequentially reimburse the respective financial companies."

The funding will utilize the 300 billion KRW Small and Medium Venture Business Startup and Promotion Fund confirmed by the National Assembly at the end of last year. Since it is difficult for small financial sectors to operate with their own resources, policy funds have been mobilized. As this is a statutory project, duplicate benefits within the small financial sector are not allowed; however, if loans with interest rates between 5% and 7% are dispersed across multiple financial institutions within the small financial sector, they can be combined to receive support up to a loan amount of 100 million KRW. The maximum refund amount a borrower can receive is approximately 1.5 million KRW.

By interest rate range, for loans with interest rates between 5.0% and 5.5%, a uniform 0.5 percentage point reduction will be applied to refund interest. For rates between 5.5% and 6.5%, support will be provided for the difference from 5%, and for rates between 6.5% and 7.0%, a uniform 1.5 percentage point reduction will be applied to all interest rates. For example, if the loan balance was 80 million KRW at the end of last year with an interest rate of 6%, the one-year interest difference would be calculated as '80 million KRW × 1 percentage point (6% - 5%) = 800,000 KRW.'

A Financial Services Commission official explained, "We plan to set separate application periods and pay interest in lump sums on March 29, June 29, September 30, and December 31 to borrowers whose one-year interest payment period has arrived," adding, "In the first quarter, about 240,000 small business owners are expected to receive an average refund of 750,000 KRW each."