New Small Business Owners The Dream Package
Offering Preferential Loan Rates for Those with No Delinquency History
Introduction of Individual Business Loan Refinancing Service
and Right to Request Interest Rate Reduction
Banks Also Exp
Kwon Daeyoung, Vice Chairman of the Financial Services Commission (center), announced measures for self-support and reduction of financial costs for small business owners with faithful repayment on the morning of the 4th at the Small Business Federation in Yeouido, Seoul. He was joined by Song Chiyoung, President of the Small Business Federation, as well as related organizations including the Industrial Bank of Korea, Korea Credit Guarantee Fund, Korea Inclusive Finance Agency, and Korea Credit Information Services, along with representatives from the banking sector, mutual finance industry, and fintech industry. Photo by Financial Services Commission
The government has decided to provide a special support fund of 10 trillion won for small business owners struggling due to the economic downturn. To ease the financial burden on small business owners, a refinancing service for individual business loans will be introduced, and the right to request interest rate reductions will be further promoted. The banking sector will also expand eligibility for its business closure support refinancing loans for small business owners and launch new low-interest demolition support loans.
New "The Dream" Package for Small Business Owners Offers Preferential Loan Rates and Guarantee Fees
On the morning of September 3, the Financial Services Commission announced at a "Small Business Financial Support Meeting" held at the Small Business Federation in Yeouido, Seoul, that it plans to provide a special new fund totaling 10 trillion won for small business owners who are faithfully repaying their debts.
This 10 trillion won fund will be distributed through the newly established "The Dream" package for small business owners at the Industrial Bank of Korea and the Korea Credit Guarantee Fund. The Dream package offers aggressive preferential treatment on loan interest rates and guarantee fees. Small business owners with no history of delinquency and a record of faithful repayment will benefit from preferential interest rates reduced by up to 0.2 to 0.5 percentage points and additional reductions in guarantee fees by up to 0.3 percentage points, allowing them to access the package at even lower costs.
Loan limits will be raised, and eligibility criteria will be relaxed. For example, the average loan amount for COVID-19-related business support products was previously between 30 million and 60 million won, but under this program, the product limit will be increased by more than 66%. Borrowers who were previously eligible for a 60 million won limit will now be able to borrow up to 100 million won.
This program will provide customized support tailored to the specific circumstances of each small business owner, such as startup, growth, or business difficulties.
For startups, special support totaling 2 trillion won will be provided through the Industrial Bank of Korea for small business owners who have started their business within the last seven years, covering facilities, operating funds, and consulting. For early-stage small business owners, 1.8 trillion won will be provided for facility investment, such as self-owned business premises. The limit will be set at 90% of the required facility investment funds (up from the previous standard of 80%). In addition, a dramatic preferential interest rate of up to -3.5 percentage points will be applied by combining local government interest subsidies with the Industrial Bank of Korea's own capacity for rate reductions, and some borrowers may be able to access rates as low as 1%. The Industrial Bank of Korea will also provide 200 billion won in guaranteed loans for businesses using facility loans that need operating funds.
For the growth phase, 3.5 trillion won will be provided. The Industrial Bank of Korea will supply 1.5 trillion won in "Value Growth Loans" to small business owners expected to achieve sustainable growth, such as those undergoing digital transformation, social enterprises, and family-friendly businesses. To provide more robust growth support, operating and facility funds will be supplied with a maximum limit of 3 billion won, and preferential interest rates of up to 1.3 percentage points will be offered. Additionally, a "Scaling Up" program totaling 1 trillion won will be provided to small business owners whose businesses are expanding in scale through increased sales, employment, or new exports. Operating funds with a limit of 100 million won will be supplied, and preferential interest rates of up to 1.5 percentage points will be available.
The Korea Credit Guarantee Fund will supply 1 trillion won in "Step Up Guarantees" for companies with increasing sales and employment that are expected to grow into small and medium-sized enterprises. Operating funds up to 300 million won or facility funds within the required amount will be available, along with a 0.3 percentage point reduction in guarantee fees.
For business difficulties, 4.5 trillion won will be allocated. For small business owners experiencing business difficulties such as declining sales or rising costs, a total of 2.5 trillion won in emergency funds will be supplied under the best preferential terms through the Korea Credit Guarantee Fund's "Livelihood Recovery Special Guarantee" and the Industrial Bank of Korea's "Crisis Support Loan" until the first half of next year. To revitalize traditional markets and local commercial districts, the Industrial Bank of Korea will supply 1 trillion won in small operating funds with a maximum limit of 50 million won and preferential interest rates of up to -1.5 percentage points to franchise and digital Onnuri gift certificate merchants. In addition, for 1 trillion won in loans to small business owners whose credit ratings have temporarily declined, interest rate reductions will be provided upon maturity extension to ensure that the interest rate does not rise above the previous rate.
Empty stores line a commercial area densely packed with shops in Sinchon, Seoul. Photo by Jo Yongjun
Refinancing Service for Individual Business Loans and Interest Rate Reduction Requests to Be Introduced
The meeting also discussed measures to improve and ease the financial burden on small business owners. To this end, a "three-part package" for interest rate reduction will be implemented, including the introduction of a refinancing service for individual business loans, promotion of the right to request interest rate reductions, and expansion of revised early repayment fee policies to the mutual finance sector. The implementation of this three-part package is expected to lower barriers to switching loans and strengthen borrowers' negotiating power when requesting rate reductions, potentially saving small business owners up to approximately 273 billion won per year in additional financial costs.
The banking sector representatives at the meeting announced strengthened support measures for small business owners facing business closure, to ensure that no small business owner is unable to close their business due to outstanding loans. First, the eligibility for the banking sector's business closure support refinancing loans will be expanded. Previously, only loans issued before December last year were eligible, but this has now been extended to include loans issued before June this year. Refinancing support will also be provided not only for the closure of a single business location but also for the simultaneous closure of multiple locations.
In response to requests from small business owners regarding the time lag between when funds are needed and when subsidies such as demolition support grants are paid (which require proof of expenditure upon business closure), a new low-interest demolition support loan will be launched. The banking sector will determine the interest rate and other terms in consultation with the Korea Inclusive Finance Agency, with plans to launch the product in the first half of next year.
Song Chiyoung, President of the Small Business Federation, commented, "The fact that we have been able to prepare measures today for supporting small business owners with faithful repayment records and reducing their financial burdens, which have been the most frequently raised requests, is a valuable response to the needs on the ground." Kwon Daeyoung, Vice Chairman of the Financial Services Commission, emphasized, "Listening to various voices in the field, I have deeply felt the urgency and difficulties faced by small business owners. We will establish a dedicated organization within the Financial Services Commission to ensure that all remaining issues are addressed to the end."
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