[Second Half Economic Policy] Small Business Loans Extended for 5 Years... Additional 10 Trillion Won for Restart Support

Government Focuses on 'Support for Small Business Owners and Self-Employed' in the Second Half of 2024

The government will extend the repayment period of policy fund loans and guaranteed loans by up to 5 years for small business owners pushed to the limit by prolonged high interest rates and economic downturn. The refinancing program, which allows switching from loans with interest rates above 7% to low-interest loans, will also be significantly expanded, and an additional 10 trillion won will be invested to support business recovery.

The 'Second Half Economic Policy Direction' announced by the Ministry of Economy and Finance on the 3rd includes policies to support the recovery of small business owners and self-employed individuals and to ease their management burdens. Kim Byung-hwan, First Vice Minister of the Ministry of Economy and Finance, stated, "We will extend the repayment period of policy fund loans and guaranteed loans by up to 5 years to reduce financial burdens such as principal and interest repayments, and expand the conversion of high-interest loans above 7% to low-interest loans. We will also boldly support improvements in tax and fiscal systems to alleviate major cost burdens such as rent, electricity bills, and delivery fees."

Choi Sang-mok, Deputy Prime Minister for Economic Affairs and Minister of Economy and Finance, is attending and speaking at the Economic Ministers' Meeting held at the Government Seoul Office in Jongno-gu, Seoul on the 26th. Photo by Jo Yong-jun jun21@

Loan Extensions for Small Business Owners Unable to Repay... Support for Platform Delivery Fees

First, a 'Debt Relief Trio' will be promoted to support small business owners financially. The support target for the policy fund repayment extension system, which assists small business owners facing management difficulties due to sluggish sales and soaring raw material prices, will be significantly expanded, and the extension period will be increased to a maximum of 5 years. Until now, this policy applied only to businesses with more than 3 years of operation and loan balances exceeding 30 million won, but these criteria will be abolished. A plan to extend the loan repayment period by up to 5 years for small business owners using regional credit guarantee loans will also be pursued. To this end, a 5 trillion won scale conversion guarantee will be newly established. Additionally, the refinancing program requirements will be significantly relaxed to allow vulnerable small business owners with high-interest loans to switch to low-interest loans.

Various measures to ease management burdens have also been prepared. Regarding platform delivery fees, which have recently increased the burden on business owners, new support for delivery fees will be provided from next year for small-scale small business owners in the restaurant industry and others. Kang Ki-ryong, Director of Policy Coordination at the Ministry of Economy and Finance, said, "Related ministries will discuss and present measures to alleviate economic burdens in representative small business sectors such as delivery apps within the second half of this year." For mobile gift certificates, a public-private consultative body will operate to reduce fees by 5-10% and discuss shortening the settlement cycle to a maximum of 45 days.

The 'Good Landlord' tax credit support period, scheduled to end this year, will be extended by one year until the end of next year. The Good Landlord tax credit is a system that allows landlords who reduce commercial rent for small business tenants to deduct up to 70% of the reduced amount from income tax or corporate tax. To reduce the electricity bill burden for small-scale small business owners, the eligibility for 200,000 won electricity bill support will be raised from annual sales of 30 million won or less to 60 million won or less, increasing the support scope to up to 500,000 people.

Measures to expand the employment of foreign workers in the food service sector, which suffers from chronic labor shortages, are also included. Currently, employment permits (E-9 visa) are allowed only for kitchen assistants at Korean restaurants with 5 to 7 years of operation; plans to expand this scope are under review. Financial support to promote the spread of smart technologies such as kiosks will also be increased to ease labor cost burdens for small business owners.

Crackdown on Franchise Headquarters' Abuse... Strengthening Livelihood Safety Nets

Abusive practices by franchise headquarters that excessively collect price differences from franchisees will be improved. First, through amendments to the Franchise Business Act, franchise headquarters will be required to consult with franchisees whenever they disadvantageously change transaction conditions for 'essential items.' The profit structure between headquarters and franchisees will also be improved. The profit structure will be converted to a royalty system, and franchise headquarters that reduce essential items will be given incentives during fair trade agreement compliance evaluations.

The livelihood safety net will be strengthened by easing the burden of joining the Yellow Umbrella Mutual Aid. The annual income deduction limit for Yellow Umbrella Mutual Aid contributions, a kind of retirement fund for small business owners, will be increased from 5 million won to 6 million won. Childbirth will be included as a valid reason for deferring contribution payments. Regarding employment insurance, the system will be improved so that small business owners can apply for insurance premium support in a one-stop manner when enrolling in employment insurance for self-employed workers at the Korea Workers' Compensation and Welfare Service.

Support measures for high-growth small business owners have also been presented. By the end of this year, 57 digital traditional markets capable of online shopping, such as Seoul's Gyeongdong Market, will be established, and from next year, the 'TOPS Program' will be implemented to directly discover promising brand small business owners in collaboration with 10 private platforms by sector. A milestone-based support program worth up to 700 million won will be newly established to help small business owners scale up to small enterprises.

The New Start Fund supporting small business owners facing closure risks will be expanded from the current 30 trillion won to over 40 trillion won. The New Start Fund was introduced in October 2022 to alleviate the debt burden of small business owners affected by the COVID-19 pandemic. It provides debt adjustment by reducing 70-80% of the principal or lowering interest on debts up to 1.5 billion won. Along with debt adjustment, the Ministry of Employment and Labor's employment training and the Ministry of SMEs and Startups' re-startup commercialization programs will be linked to help those who have undergone debt adjustment successfully restart their businesses, and the principal reduction rate will be increased by 10 percentage points upon completion of this training. Finally, a one-stop platform that provides comprehensive guidance on various government support measures such as small business finance, employment/startup, and management stabilization will be established and launched from January next year.