Pre-consultations for Debt Adjustment and Closure Support Begin on the 27th
Each Program Scheduled for Launch in April
Commercial banks have introduced measures to support small business owners who are struggling to repay loans or preparing to close their businesses. The main points are to provide benefits such as interest rate reductions to small business owners facing difficulties in loan repayment and to allow those preparing for closure to repay their loans gradually.
The Korea Federation of Banks announced on the 24th that it will launch a debt adjustment and closure support program for small business owners in April and will start pre-consultations from the 27th to help small business owners prepare for it.
The customized debt adjustment program is a measure for small business owners who are not yet delinquent but are having difficulty repaying loans. Even for borrowers in good standing, long-term installment repayment and interest rate reductions will be offered if repayment difficulties are anticipated. Specifically, existing business loans will be refinanced into long-term installment products for up to 10 years for secured loans and up to 5 years for unsecured loans. For borrowers applying within three years from the implementation date during refinancing and maturity extension, the recalculated interest rate will be capped at or below the existing rate even if it increases. If the recalculated interest rate is not higher than before, some interest rate reductions will be applied.
The program targets individual and corporate small business owners with a credit rating of 6 or lower, a cumulative delinquency period of 30 days or more within 6 months at the relevant bank, and a representative with an annual income of 35 million KRW or less or in the bottom 10% of credit scores. Borrowers facing financial difficulties such as temporary closure or with continuous delinquency periods of less than 90 days are also eligible. The scale criteria include annual sales of less than 2 billion KRW in the previous year, total assets under 1 billion KRW, or total loans from the relevant bank under 1 billion KRW. However, industries such as gambling machine and speculative unhealthy amusement equipment manufacturing or entertainment bars are excluded.
The banking sector plans to support small business owners preparing to close their businesses by allowing them to repay remaining loans slowly. The target includes normal repayment personal business loans held by those planning to close or already closed businesses. Support will be provided for up to 30 years within the borrower's desired range. For unsecured loans, if the balance is 100 million KRW or less, support is up to 30 years; if the balance exceeds 100 million KRW, up to 10 years. For guaranteed loans, up to 7 years if the balance is 100 million KRW or less, and up to 5 years if it exceeds 100 million KRW. Secured loans range from 10 to 30 years. The grace period is uniformly 2 years. Borrowers can also apply for a repayment deferral of up to 1 year.
Interest rates for unsecured and guaranteed loans with balances under 100 million KRW will be supported at low rates. In this case, 0.1 percentage points will be added to the 5-year benchmark interest rate of each bank (3% as of the 17th). Early repayment fees due to refinancing will be waived. However, borrowers who are not in a closure state, those who have closed only some of multiple business locations, or those undergoing debt adjustment are excluded from the loan program. Support will be suspended if a borrower receiving this program takes out a new business loan.
Small business owners can visit their bank branch to inquire about the main details of the program. Banks will provide pre-consultations based on the small business owner's situation at the time of consultation, including guidance on available programs, required documents, and expected launch schedules. Appointment reservations are also possible.
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