Average Loan Amount for Self-Employed Exceeds 100 Million Won
Annual Interest Rate Burden Reaches 9.4%
Domestic self-employed business owners reported that their performance in the first half of this year deteriorated significantly, and they expect the second half to be unfavorable as well.
According to a survey conducted by Mono Research on behalf of the Korea Economic Research Institute on July 10, targeting 500 self-employed individuals nationwide in the restaurant, accommodation, and retail industries, respondents' net profit in the first half of this year decreased by 15.3% compared to the same period last year.
This figure is the arithmetic average of the net profit changes reported by respondents. The proportion of respondents who said their net profit decreased was 76.8%, while those who reported an increase accounted for 23.2%. Regarding sales in the first half, 76.8% of respondents said their sales declined compared to last year, with the average decrease recorded at 15.2%.
For the second half of the year, 62.2% of respondents expect their net profit to decrease, and 61.0% expect sales to decrease. The anticipated average decrease is 8.0% for net profit and 7.7% for sales. The most burdensome business costs were identified as raw material and ingredient costs (22.4%), labor costs (22.3%), rent (18.2%), and loan principal and interest payments (13.0%). In addition, the average loan amount held by self-employed respondents was 103.6 million won, with a monthly interest payment of 810,000 won and an annual interest rate burden of 9.4%.
The Korea Economic Research Institute analyzed, "While the average loan interest rate at deposit banks is 4.5% and the rate for small loans is 6.8%, self-employed business owners are financing at much higher rates, resulting in a heavy financial burden."
Furthermore, 43.6% of respondents said they are considering closing their businesses within the next three years. The reasons for considering closure included continued deterioration of business performance (28.2%), uncertain prospects for economic recovery (17.0%), worsening financial conditions and loan repayment burdens (15.1%), and rising costs of raw materials and other inputs (13.8%).
As for when they expect an economic recovery, responses were: the first half of next year (30.0%), the second half of next year (20.6%), and the second half of the year after next (17.6%). The main business difficulties cited were "declining sales due to weakened consumer sentiment" (36.2%), "burden of purchasing raw and subsidiary materials" (25.1%), and "rising rent and various fees and tax burdens" (11.7%). For policies to boost sales (multiple responses allowed), "expanding the credit card income deduction rate and limit for small business workplaces" (30.0%) ranked first, followed by "fostering small neighborhood commercial districts by region" (17.1%). To ease business burdens, "strengthening tax support" (22.2%) and "price stabilization" (20.7%) were most frequently chosen, while for financial support, "expanding customized low-interest policy funds" (27.4%) and "expanding low-interest refinancing loans" (21.7%) received the most responses.
Lee Sangho, head of the Economic and Industrial Division at the Korea Economic Research Institute, stated, "Policies are needed to reduce the real business and financial burdens of self-employed business owners," adding, "The Korea Economic Research Institute will also take the lead in improving the business environment for the self-employed by boosting domestic tourism and stimulating domestic demand."
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