40 Trillion Won Support for 1,000 Innovative Companies... Establishment of Joint Guarantee between Large and Medium Enterprises

[Asia Economy Reporter Kim Hyo-jin] The government will select about 1,000 innovative companies and provide support worth 40 trillion won. Additionally, a joint guarantee program will be established that allows small and medium-sized enterprises (SMEs) to receive guarantee support based on the credit of large companies with which they have cooperative relationships.

The Financial Services Commission announced the "Key Tasks for Expanding Innovative Finance in 2020," which includes these measures.

Based on nurturing programs operated by the Ministry of Trade, Industry and Energy and the Ministry of SMEs and Startups, such as "World Class 300," "Strong Small Giants 100," and "K-Unicorn," the government plans to create a pool of about 1,000 innovative company candidates and support them with up to 15 trillion won each in loans and investments, totaling up to 30 trillion won over three years.

For innovative companies with low collateral power, the government plans to supply up to 10 trillion won in guarantees over three years through a new evaluation system utilizing a future growth potential assessment system.

Furthermore, considering the difficulties SMEs face in raising funds individually due to low sales performance and capital, the government will create a program that allows SMEs to receive guarantee support based on the credit of large companies in vertical cooperative relationships and the profitability of joint projects.

For example, a total guarantee limit will be set for groups of small and medium-sized equipment suppliers participating in specific shipbuilding orders of large shipbuilding companies or for groups of second-tier suppliers trading with first-tier suppliers of large automobile companies, and after minimal qualification screening, they will be able to receive guarantee support from the Credit Guarantee Foundation.

The government plans to pilot this program targeting cooperative companies of large shipbuilding and automobile companies, then gradually expand the scope by identifying additional target companies.

To utilize "commercial credit" information, which is a crucial basis for assessing the likelihood of corporate default, in corporate evaluations, the government will introduce an index called the "Korean Paydex."

The Korea Credit Guarantee Fund will build a commercial transaction database using guarantee companies' transaction data and external data, calculate a commercial credit index based on this, and launch guarantee products linked to it, enabling companies with low credit ratings but excellent commercial credit scores to receive smooth guarantee support.

Additionally, the government will establish "non-recourse factoring" so that selling companies (subcontractors) can focus on management without worrying about the bankruptcy of purchasing companies. This system allows selling companies to sell accounts receivable from purchasing companies to a factor for cash conversion without bearing repayment responsibility to the factor.

Initially, the government plans to pilot this by purchasing accounts receivable worth 50 billion won annually and review the results for gradual expansion.

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