"Saving the Self-Employed"... Seoul Expands Low-Interest Overdrafts and Marketing Support

Low-Interest Loans of Up to 10 Million Won for the Self-Employed
Total Fund of 200 Billion Won; Applications Open from August 28
Comprehensive Support Package for Small Business Owners at Every Stage

The Seoul Metropolitan Government is expanding its financial and administrative support for self-employed business owners. In addition to management consulting and marketing support launched earlier this year, the city has now introduced a dedicated overdraft account to prevent these business owners from turning to illegal private lenders.

According to the Seoul Metropolitan Government on August 18, the city will launch the 'Safe Account,' an overdraft account exclusively for livelihood-based self-employed business owners, with a total fund of 200 billion won, starting on August 28. The Safe Account, first introduced nationwide in March, is designed to prevent self-employed individuals who have difficulty accessing institutional loans from being pushed toward illegal private lending. It allows users to freely withdraw and repay funds up to a maximum limit of 10 million won.

The outcry from self-employed business owners is severe. Many shops are closing down, saying "It's harder than during COVID," but no one is starting new businesses, so a virtuous cycle is not happening. Even after cleaning up and tightening regulations to make it proper, Hwanghakdong Kitchen Street remains deserted with no one coming to start businesses. Photo by Jo Yongjun

A survey of 250,000 small businesses and microbusiness owners currently using guarantees from the Seoul Credit Guarantee Foundation found that the rate of increase in multiple debts among young microbusiness owners under the age of 30 and in business for less than three years was 17.5%, the highest among all age groups. In addition, among microbusiness owners aged 60 or older who have operated their businesses for more than 10 years, the ratio of outstanding loans to annual sales reached 79.6%, indicating severe management difficulties.

In response, the Seoul Metropolitan Government has allowed young entrepreneurs under the age of 30 who have been in business for less than three years to apply for the Safe Account if they have operated their business for more than six months, even if they have not yet reached one year. For long-established business owners aged 60 or older with more than 10 years of business experience, restrictions on the number of secondary financial institutions they can use, such as card loans and cash advances, have been relaxed, so those using more than four institutions are also eligible to apply. Other requirements include having a total sales amount of at least 2 million won in the past three months or an annual reported sales amount of at least 10 million won, and a representative with a NICE personal credit score of 600 or higher.

To prevent server overload on the foundation's mobile app, applications during the first week will be processed according to a five-group system based on the last digit of the applicant's birth year. From September 4, anyone can apply regardless of birth year. The loan interest rate is set at 4.50% (CD rate + 2.0%), which is lower than the average card loan rate at commercial banks of 14.0%. With the introduction of non-face-to-face automatic screening via the mobile app, loan approval can be completed within one business day without the need for complex paperwork or in-person visits.

The Seoul Metropolitan Government plans to further expand support for self-employed business owners, including small business owners. This year alone, the city has allocated 25 billion won to a comprehensive package of support measures tailored to various stages of the business life cycle. Support is being provided not only for education and startup consulting, but also through a self-employment clinic, digital transformation assistance for middle-aged and older microbusiness owners, and early identification of microbusinesses in crisis.

The city has also launched management consulting to help boost sales. Recently, it provided free coupons worth 450,000 won per person, totaling 45 million won, so that self-employed business owners could directly promote their shops on the 'Ttaenggyeoyo' app. Lee Haeseon, Director of the Seoul Metropolitan Government's Public Welfare and Labor Bureau, stated, "We will continue to pursue practical financial support policies that small business owners can truly feel."