Small Business Restructuring on Track... Five Major Banks Provide Nearly 60 Billion Won in Debt Adjustment Support for Small Business Owners in Two Months

Financial Services Commission to Release Bank Performance Data Before July
Sosangongin 119 Plus Provides 36.9 Billion Won in Support Within Two Months
Business Closure Support Refinancing Loans Reach 22.7 Billion Won
Banks Offer Debt Adjustment Support to Small Business Owners Before Delinquency
"Bad Bank" to Handle Debt Adjustment After Delinquency

It has been confirmed that, within just two months of implementation, a total of 59.587 billion won has been disbursed (based on the five major banks) through the banking sector's comprehensive financial support programs for small business owners facing difficulties in loan repayment or at high risk of closure (Sosangongin 119 Plus and Business Closure Support Refinancing Loans). These programs are designed for small business owners who are in the pre-delinquency stage, and are voluntarily supported by commercial banks.

The financial authorities plan to announce the status of debt adjustment executions for small business owners by all banks before July. In addition, they intend to pursue a two-track restructuring of small business owners: one track involves the establishment of a "bad bank" to handle debt adjustment for those who are already delinquent, and the other continues the current support programs.

According to financial authorities and the financial industry on June 19, the execution amount for "Sosangongin 119 Plus" at the five major banks (KB Kookmin, Shinhan, Woori, Hana, and NongHyup) was tallied at 36.899 billion won (398 cases), while the execution amount for the "Business Closure Support Refinancing Loan" was 22.688 billion won (581 cases). It is expected that the total execution amount, including both the five major banks and other banks, will approach 100 billion won.

The financial authorities announced the "Banking Sector Financial Support Plan for Small Business Owners" in December last year. As part of this initiative, two types of debt adjustment programs for small business owners were created: ▲Sosangongin 119 Plus ▲Low-interest installment repayment for business closures. Commercial banks began implementing these programs on April 18 this year and are providing independent support to small business owners.

Sosangongin 119 Plus is a program that supports small business borrowers at risk of delinquency by offering up to 10 years of long-term installment repayment (5 years for unsecured loans, 10 years for secured loans) and interest rate reductions to prevent them from falling into delinquency. Initially, only individual business owners were eligible, but now corporate small business owners can also benefit.

The support methods have also been strengthened. While previously focused on maturity extensions, the program now supports long-term installment repayment. In this case, the recalculated interest rate ceiling is set at the original loan rate, allowing borrowers to benefit from interest rate reductions. In addition, early repayment fees are also waived.

An executive vice president at one of the five major banks stated, "While maturity extensions merely defer debt, long-term installment repayment allows borrowers to gradually pay down principal and interest over time, structurally reducing the debt burden."

The Business Closure Support Refinancing Loan is a banking sector loan product that converts business loans of small business owners who are planning to close or have already closed their businesses into household loans. It was jointly developed by banks to support borrowers who find it difficult to make a fresh start due to debt repayment obligations after business closure.

If the loan amount is 100 million won or less, only the minimum additional interest rate (0.1%) is applied to the variable rate, and principal and interest can be repaid in equal installments for up to 30 years. For example, if an individual business owner repays a 100 million won loan over 30 years, the repayment amount would be about 10,000 won per day or about 300,000 won per month.

Meanwhile, the Financial Services Commission plans to compile the execution amounts by the end of this month and announce the status in the first week of July.