40% of SMEs Report "Financial Situation Deteriorated This Year"

Korea Federation of SMEs Releases Results of the "2025 Survey on Financial Usage and Difficulties of SMEs"

A survey found that 40.0% of small and medium-sized enterprises (SMEs) reported that their financial situation had "deteriorated" this year. Only 13.2% of SMEs responded that their situation had "improved," which is about one-third of the former.

On December 29, the Korea Federation of SMEs announced the results of the "2025 Survey on SME Financial Utilization and Difficulties," which included these findings. The survey was conducted from December 9 to 12, targeting 500 SMEs.

Among the SMEs that reported a deterioration in their financial situation, the reasons cited (multiple responses allowed) were "sluggish sales" at 59.0%, "increase in raw and subsidiary material prices" at 51.5%, and "rise in labor costs" at 33.0%.

Regarding the use of external funds this year, 40.4% of SMEs responded "used," while 59.6% responded "did not use." As for the purposes of these funds (multiple responses allowed), "payment for purchases" was the highest at 70.3%, followed by "payment of labor costs" (53.5%) and "repayment of principal and interest on existing loans" (30.2%).

The main difficulties encountered in raising funds through banks (multiple responses allowed) were "high loan interest rates" at 73.6%. As for their wishes regarding bank loans (multiple responses allowed), "lowering loan interest rates" was the highest at 79.6%.

When asked about the most needed financial support for SMEs (multiple responses allowed), "expanding policies to ease interest rate burdens" ranked highest at 38.8%. Despite the Bank of Korea's base rate cuts, it is analyzed that the financial cost burden on SMEs has not been resolved. Other necessary financial support measures included "expanding policy loan programs" (27.4%) and "improving the practice of relying on collateral loans" (14.0%).

Regarding the overall borrowing conditions for 2026, 37.0% of respondents expected them to "worsen," which is 4.4 percentage points higher than the 32.6% who gave the same response in last year's survey. Regarding expectations for improvement in the SME financial environment following the new government's core financial policy of a "major shift toward productive finance," 51.4% expected conditions to "improve."

Lee Minkyoung, Director of Policy at the Korea Federation of SMEs, stated, "Even though the Bank of Korea has cut its base rate since October last year, SMEs cited high loan interest rates as their biggest financial difficulty in 2025. The most needed financial support for SMEs was also the expansion of policies to ease interest rate burdens, indicating that the financial cost burden continues to persist."

Director Lee added, "As the government is pursuing a 'major shift toward productive finance' by redirecting financial resources concentrated in household loans such as real estate to productive sectors that can create added value, such as high-tech industries, small business owners, and venture companies, the Korea Federation of SMEs will also continue to develop financial policies to build a growth ladder for SMEs and small business owners based on productive finance."