Around 27.7 Trillion Won in Applications Since Fund Launch
Four Lending Companies Join New Start Fund Agreement
Principal and Interest Reduction Incentives Introduced to Encourage Faithful Repayment
With four lending companies, including Leadcorp, newly joining the New Start Fund, the debts of small business owners and self-employed borrowers held by these companies will also be eligible for restructuring. In addition, an incentive will be introduced under which borrowers who have faithfully implemented their debt restructuring repayment plans for more than one year and then make early repayment of their remaining debt will receive additional reductions in principal and interest.
The Financial Services Commission announced on the 27th that it would implement these measures this year, following a meeting held on the 26th to review the progress of the New Start Fund. Korea Asset Management Corporation (KAMCO), which operates the New Start Fund, and the Credit Counseling & Recovery Service attended the meeting to review operating performance to date and discuss future tasks.
The New Start Fund has been supporting debt restructuring for delinquent (or at-risk) borrowers since October 2022, with the aim of easing the debt burden of small business owners and self-employed people as part of inclusive finance, preemptively responding to potential bad debts, and supporting a swift recovery. As of the end of last year, cumulative support amounted to 27.7 trillion won in applications (175,000 people) and 9.8 trillion won in signed restructuring agreements (114,000 people). In 2025, the amount of debt applied for restructuring reached 11 trillion won, up 18% from the previous year, while the amount of debt under signed agreements rose to 4.9 trillion won, an increase of 72%.
Against this backdrop, the Financial Services Commission announced that four high-quality lending companies - Leadcorp, Barocredit Loan, Sunny Capital Loan, and Just In Time Loan - will newly participate in the New Start Fund. As a result, the debts held by these companies will also be covered by the New Start Fund, allowing a larger number of small business owners and self-employed borrowers to receive debt restructuring support.
The Financial Services Commission also noted that the number of borrowers entering into New Start Fund restructuring agreements is steadily increasing, and that more borrowers will begin repayment as grace periods of up to 1 to 3 years, depending on the type of debt, come to an end. In response, it decided to improve the related system.
First, to encourage early and faithful repayment, incentives will be introduced, and the grounds for repayment deferment will be expanded so that contract cancellations can be minimized when borrowers face temporary repayment difficulties. In addition, the authorities plan to strengthen linkages with employment and start-up programs to expand support for business recovery.
For unsecured debt restructuring of delinquent borrowers, a new early repayment incentive will be introduced. Currently, there is no additional reduction for early repayment, but going forward, borrowers who make early repayment after faithfully repaying for more than one year will receive an additional reduction of 5% to 10% of the remaining debt burden.
For unsecured debts of borrowers at risk of delinquency (those with arrears of less than 90 days), a faithful repayment incentive will also be introduced. At present, they repay at a fixed interest rate for up to 10 years (20 years for financially vulnerable groups) without any interest rate reduction benefits. In the future, however, for every one-year period of faithful repayment, the initial applicable interest rate will be reduced by an additional 10%. If applied for up to four years, the rate can be lowered to as little as 3.25%.
The criteria for repayment deferment will also be broadened. Previously, deferment of up to three years was allowed only in cases such as the borrower’s own illness, business suspension or closure, or serious disease. Going forward, borrowers will also be able to apply for deferment in cases such as childbirth (for one year from the date of birth), parental leave, and caring for a family member who is severely disabled or has one of the four major serious diseases. In addition, borrowers who have faithfully repaid for more than one year may apply for an emergency repayment deferment of up to two months if an urgent situation arises.
Linkages with employment and start-up programs will also be expanded. Currently, borrowers who have closed their businesses and are undergoing debt restructuring can receive additional principal reductions if they complete designated programs such as the National Employment Support System and the Hope Return Package. In the future, additional principal reduction benefits will also be available to those who complete programs such as the Youth Employment Academy (run by the Seoul Business Agency), the Re-Challenge Success Package (run by the Korea Institute of Startup & Entrepreneurship Development), and specialized re-startup training and consulting programs (run by the Korea SMEs and Startups Agency).
The geographical scope of the business recovery support program will be expanded from Busan to nine local governments nationwide. The authorities plan to sequentially sign business agreements within the first half of this year and implement the system, while expanding the eligible group from existing purchase-type contract borrowers to intermediary-type contract borrowers as well.
The Financial Services Commission plans to implement these system improvements without delay, following consultations with related institutions, revisions to agreements, and IT system development. The Commission stated, "Our goal is to establish a virtuous cycle in which borrowers adjust their debts in line with their repayment capacity and then faithfully carry out their repayment plans," adding, "We hope that these system improvements will lead to a tangible recovery for small business owners and self-employed people."
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