Starting from the 1st of next month, a bank sector support program exceeding 11 trillion KRW will be launched to assist mid-sized and small-to-medium enterprises (SMEs) struggling with high inflation and high interest rates. This is a follow-up measure to the previously announced 'Customized Corporate Finance Support Plan' exceeding 76 trillion KRW and the 'Financial Support Plan for Vulnerable Sectors to Enhance Livelihood Vitality.'
On the 31st, the Financial Services Commission stated, "Policy financial institutions such as Korea Development Bank and Industrial Bank of Korea, along with the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup), will collaborate to respond meticulously with customized solutions tailored to corporate demand."
First, the five major banks and Korea Development Bank have prepared a low-interest loan program worth 6 trillion KRW exclusively for mid-sized enterprises aiming to enter new growth sectors. The target companies are mid-sized enterprises producing or utilizing items listed in the 'Innovation Growth Joint Standards,' which consist of 284 items across nine themes with high growth potential, such as advanced manufacturing and automation.
Industrial Bank of Korea and the five major banks will start operating a special program to reduce financial costs worth 5 trillion KRW for small and medium-sized corporate clients. This program aims to revitalize SMEs that are operating normally with operating profits but face heavy interest burdens by reducing their interest expenses for one year.
For loans with interest rates exceeding 5%, the interest rate will be reduced to up to 5%, with a maximum reduction of 2 percentage points for one year. This benefit is provided once per borrower upon application.
Additionally, the banking sector will expand the 'Rapid Financial Support Program' to help SMEs facing temporary liquidity shortages quickly return to normal operations. This program, which has been in operation since 2008, allows companies that may face temporary liquidity risks but are capable of normal management (with a corporate credit risk rating of B) to defer loan repayments and receive interest rate reductions for a certain period upon application.
Starting next month, the support will extend not only to companies currently facing temporary liquidity risks but also to those 'expected' to face such risks. In other words, even if a company is normally operating but experiences a sales decrease of 10% or more compared to the previous period or has negative cash flow, and if a re-evaluation of the corporate credit risk rating is likely to result in a B rating, the company will also be eligible for support.
The Financial Services Commission explained, "We will significantly lower loan interest rates for one year to the level of major commercial banks' funding costs (currently in the 3% range) to support rapid and certain normalization."
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