This Year, 3 out of 10 Mid-sized Companies Face Worsening Financial Conditions

'Survey Results on Financial Difficulties of Mid-sized Companies' Announced
High Market Bank Interest Rates and High Barriers to Policy Financing Double Burden

As high interest rates continue for an extended period, a survey revealed that the financial conditions of 3 out of 10 mid-sized companies have worsened compared to the previous year. It is assessed that concerns over a rapid deterioration in liquidity are increasing due to high interest rates at commercial banks and rigid qualification requirements for policy funds.

The Korea Federation of Mid-sized Enterprises announced the results of the "Mid-sized Enterprises Financial Difficulties Survey" on the 14th. This survey was conducted from March 4 to 22 this year, targeting 339 mid-sized companies.

According to the survey results, only 8.6% of mid-sized companies responded that their financial conditions had improved, while 28.6% said their financial conditions had worsened. The proportion of companies with improved financial conditions also significantly decreased compared to last year (15.7%). Among the mid-sized companies that reported worsened financial conditions, 34.0% cited ‘increased interest expenses due to interest rate hikes’ as the biggest cause. This was followed by ‘poor sales performance (32.0%)’ and ‘increased production costs (16.5%).’

Despite the heavy burden of high interest rates, more than half of the mid-sized companies (55.8%) were raising external funds through ‘commercial banks.’ This was followed by ‘policy financial institutions (8.8%),’ ‘corporate bond issuance (2.9%),’ and ‘guarantee institutions (1.5%).’ It was found that 29.2% of mid-sized companies did not raise external funds. Among companies that raised external funds, 87.9% responded that the interest expenses were ‘burdensome.’ In particular, among those with a credit rating of BBB+ or below, 39.2% said it was ‘very burdensome,’ which is more than 2.5 times higher than the 15.5% of those rated A- or above.

Lee Hojun, Executive Vice Chairman of the Korea Federation of Mid-sized Enterprises, said, “With the worsening domestic and international economic environment and poor business performance increasing the burden of corporate loans, the high interest rate policy of the U.S. Federal Reserve is expected to continue, deepening concerns within the mid-sized enterprise sector.” He added, “We will cooperate with policy and private financial institutions as well as the government and the National Assembly to establish a stable funding system, including preferential loan rates and expanded limits, and the creation of dedicated support institutions and funds for mid-sized companies.”