SMEs 47.2% "Worsened Financial Conditions Compared to Last Year"

The Korea Federation of Small and Medium Business (Kbiz) announced the results of the "2024 Small and Medium Enterprise (SME) Financial Usage and Difficulties Survey," conducted on 500 SMEs, on the 23rd.

According to the survey, the most common response to the question about this year's financial situation was "worsened (47.2%)." This represents a 15.5 percentage point increase compared to last year's survey, where 31.7% responded "worsened." In contrast, only 6.6% of companies reported that their situation had "improved."

In particular, the smaller the sales scale, the higher the proportion of companies reporting "worsened," indicating that smaller businesses are facing more severe financial difficulties.

The main reason cited for the worsening financial situation was "poor sales (59.3%)," followed by ▲rising raw material prices (41.9%) ▲increased labor costs (26.3%).

Regarding difficulties in raising funds through banks, "high loan interest rates (46.9%)" was the most frequently mentioned issue, and the most requested measure related to bank loans was "lowering loan interest rates (74.6%)."

The most urgent financial support task for SMEs was "expansion of policies to ease interest burden (38.6%)," indicating a need to alleviate the financial cost burden caused by prolonged high interest rates.

When asked about changes in loan interest rates following two recent base rate cuts by the Bank of Korea, the highest response was "no change (49.4%)," suggesting that the effects of the base rate cuts have not yet materialized.

Regarding the appropriate base rate for next year, 61.2% of all respondents answered that a "rate cut" is necessary, while 34.8% responded "hold steady."

When asked about next year's banking conditions, 32.6% expected overall borrowing conditions to worsen. This is a 14.9 percentage point increase compared to last year's survey, where 17.7% responded "worsened."

The proportion of respondents expecting stricter screening criteria rose to 24.6%, up 4.9 percentage points from 19.7% last year.

Choo Moon-gap, Head of the Economic Policy Department at Kbiz, stated, "The number of SMEs experiencing worsened financial conditions has significantly increased this year due to declining sales and sustained high interest rates. Banks should lower loan interest rates in line with the Bank of Korea's two base rate cuts to ease the financial burden on SMEs."