A Total of 2 Trillion Won Newly Supported for Businesses and Small Merchants Affected by the Novel Coronavirus

Directly or indirectly affected small and medium enterprises
New funding support and extension of existing loan and guarantee maturities
Enhanced support for traditional market merchants, small business owners, and micro-entrepreneurs

[Asia Economy Reporter Kangwook Cho] The government will provide a total of 2 trillion won in new funds to support small and medium-sized enterprises (SMEs), mid-sized companies, and small business owners affected by the spread of the novel coronavirus infection (Wuhan pneumonia). Loan interest rates will be preferentially applied, and guarantee fees will be reduced. Additionally, for those currently using loans and guarantees from existing policy financial institutions, maturities will be extended.

On the 7th, the government held the "Economic Ministers' Meeting on Response to the Novel Coronavirus" and announced a financial support plan to supply a total of 2 trillion won, including 300 billion won from the Korea Development Bank, 100 billion won from the Industrial Bank of Korea, 1 trillion won from the Export-Import Bank of Korea, 300 billion won from the Korea Credit Guarantee Fund, 100 billion won from the Korea Technology Finance Corporation, 100 billion won from regional credit guarantee foundations, 25 billion won from the Small and Medium Business Corporation, and 20 billion won from the Small Enterprise and Market Service.

First, approximately 1.9 trillion won in new funds will be supplied to SMEs and mid-sized companies that have suffered direct or indirect damage or are expected to be affected by the novel coronavirus. The Korea Development Bank will provide up to 7 billion won per mid-sized company and 5 billion won per SME, while the Industrial Bank of Korea will offer up to 500 million won per company and reduce interest rates by up to 1.0 percentage point. The Korea Credit Guarantee Fund will increase the guarantee ratio (from 85% to 90%) and reduce guarantee fees (by up to 0.2 percentage points). The Export-Import Bank of Korea will reduce interest rates by 0.3 percentage points for mid-sized companies and 0.5 percentage points for SMEs. Additionally, the Small and Medium Business Corporation will support up to 1 billion won per company, and the Korea Technology Finance Corporation will provide up to 300 million won per company, increase the guarantee ratio (from 85% to 95%), and offer a fixed guarantee fee rate of 1.0%. Notably, there are no industry restrictions for this support.

Kim Tae-hyun, Secretary General of the Financial Services Commission, is explaining the financial sector response measures related to the novel coronavirus at the joint briefing room of the Government Seoul Office Building on the 6th.

Kim Taehyun, Secretary General of the Financial Services Commission, explained, "We decided not to limit support by industry because specifying industries could artificially restrict business activities," adding, "Whether to support will be determined independently by each policy financial institution."

For SMEs, mid-sized companies, and small business owners currently using loans and guarantees from policy financial institutions such as the Korea Development Bank, Industrial Bank of Korea, Export-Import Bank of Korea, Korea Credit Guarantee Fund, Korea Technology Finance Corporation, and Small and Medium Business Corporation, whose maturities are due within six months, maturities will be extended by one year and principal repayments deferred for one year. Furthermore, companies experiencing difficulties in payment settlements and delivery of goods due to the lockdown in Hubei Province, China, will receive relief: the Korea Development Bank, Industrial Bank of Korea, and Export-Import Bank of Korea will reduce additional interest rates incurred from delayed foreign currency deposits for export companies and postpone bankruptcy registration by one month. For import companies, the maturity of letters of credit will be extended up to one year. In particular, approximately 230 trillion won in policy finance planned for this year to support loans and guarantees for SMEs and mid-sized companies will be executed early.

A new fund of 100 billion won will be provided to traditional market merchants, small business owners, and micro-entrepreneurs. Business operators affiliated with traditional market merchant associations can additionally use loans up to 10 million won per person at an interest rate of up to 4.5% per annum for up to two years. To this end, the Korea Inclusive Finance Agency has increased the microfinance loan scale from 50 billion won to 55 billion won. Small business owners and self-employed individuals will receive new funds up to 70 million won per company at a fixed interest rate of 2% from the Small Enterprise and Market Service upon recognition of damage. Regional credit guarantee foundations will newly provide special guarantees with preferential guarantee ratios (from 85% to 100%) and reduced guarantee fees (from 1.0% to 0.8%) up to 70 million won per company for affected small business owners in food service, lodging, and other sectors. Additionally, the Industrial Bank of Korea will supply ultra-low interest loans up to 100 million won per company for up to eight years at a minimum interest rate of 1.5%. For low-credit (grade 6 or below) and low-income micro-entrepreneurs below the near-poverty line, approximately 440 billion won planned for this year will be smoothly supported through microfinance with loans up to 20 million won and interest rates up to 4.5% per annum for up to five years.

The financial sector will also expand support for companies. Eleven commercial banks have already implemented special financial support programs including new loans and interest rate reductions. Eight specialized credit card companies will also reduce loan interest rates and defer credit card payment claims, including offering interest-free installments to micro and small merchants.

Secretary General Kim said, "This support is a preventive early response, and additional support measures will be planned depending on future developments."

This content was produced with the assistance of AI translation services.