Financial Conditions of Mid-Sized Companies Show Little Improvement
Only 1 in 10 Reports Better Situation Than Last Year
Despite two recent base rate cuts, mid-sized companies have seen little improvement in their financial difficulties. Only one out of ten mid-sized companies reported better financial conditions compared to last year.
The Korea Federation of Middle Market Enterprises announced the results of its "2025 Survey on Financial Difficulties of Mid-sized Companies" on April 28. The survey was conducted from February 17 to 28 and targeted 748 mid-sized companies.
The results showed that only 10.9% of mid-sized companies reported improved financial conditions compared to the previous year. While 60.4% said their financial situation was about the same, 28.7% responded that their financial conditions had actually worsened this year.
The main reasons cited for the deterioration in financial conditions were "sluggish sales (53.0%)," "increased interest expenses (14.0%)," and "rising labor costs (10.2%)." Notably, 33.0% of mid-sized companies that reported worsening financial conditions expressed concern that, unless the current situation improves, they could face a liquidity crisis in the second half of the year.
Even under worsening financial conditions, 16.7% of mid-sized companies projected that their demand for funds would increase due to factors such as "rising labor costs (43.2%)," "higher prices of raw and subsidiary materials (34.4%)," and "expanded facility investment (29.6%)."
The main funding sources for mid-sized companies were commercial banks (53.6%), policy finance (11.6%), and direct finance (9.8%), indicating that policy finance remains unevenly distributed among mid-sized companies. They cited "strict eligibility requirements (28.7%)" and "lack of information on policy funds (21.3%)" as major barriers to accessing policy finance. There were also disparities in the use of policy finance depending on industry and sales scale: 16.8% for manufacturing mid-sized companies versus 7.7% for non-manufacturing, and 24.0% for those with annual sales of 500 billion KRW or more versus 8.9% for those with less than 300 billion KRW in sales.
Mid-sized companies using commercial banks reported difficulties such as "high interest rates (49.9%)," "strict and complicated screening processes (8.8%)," and "excessive collateral and guarantee requirements (8.0%)." In addition, in the previous year, 9.8% of mid-sized companies raised funds through direct finance, with more than half of these (63.0%) focusing on corporate bond issuance.
Lee Hojun, Executive Vice Chairman of the Korea Federation of Middle Market Enterprises, stated, "Due to rapid changes in both domestic and international environments?such as the global economic slowdown, the Trump administration's tariff policies, weakening domestic demand, and political instability?there is growing concern that the financial conditions of mid-sized companies, which are the foundation for investment, employment, and market expansion, will further deteriorate." He added, "Given the central role mid-sized companies play in the overall economy, including exports, it is urgent to lower the barriers to policy finance and ease the rigid operating standards of commercial banks in order to effectively address the chronic funding difficulties faced by mid-sized companies and to revitalize their activities."
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