'Help Us' Small Business Loan Applications Total 2 Trillion Won... Only 3.5% Executed

Loan Institutions Face Staff Shortages... Application Procedures Still Complex
Small Merchants Say "Closures Likely Before Receiving Help"

[Asia Economy Reporter Moon Hyewon] As consumer sentiment freezes due to the spread of the novel coronavirus infection (COVID-19), loan applications from small business owners facing the risk of closure are flooding in. However, the workforce at government-supported lending institutions is severely insufficient, and the loan process is complicated, resulting in an actual execution rate of only 3.5% of the nearly 2 trillion won in loan applications.

According to the Ministry of SMEs and Startups, the Small Enterprise and Market Service (SEMAS), and the Credit Guarantee Foundation (CGF) on the 6th, since the COVID-19 outbreak, the total amount of loan requests received through SEMAS from the start of data collection on the 13th of last month until the 3rd of this month has accumulated to 1.9817 trillion won, with 38,251 cases. Of these, only 67.3 billion won has actually been disbursed. The execution rate is 3.5%, and the number of executed cases is 1,433, meaning only about 3 out of every 100 applicants receive loans. While small business owners express dissatisfaction, CGF, the institution issuing guarantees, complains of a shortage of staff to handle the large influx of applicants all at once.

Most small business owners operating small stores or shops apply for COVID-19 policy loans through the issuance of a 'CGF guarantee certificate.' The loan process involves three main steps: application and verification certificate issuance by SEMAS, guarantee certificate issuance after CGF review, and loan execution through banks. Applicants first submit documents such as business registration certificates and comparative sales data from the previous and current years to SEMAS to receive a verification certificate. This is then submitted to CGF, which assesses eligibility for guarantee issuance. Once the guarantee certificate is issued, the loan is obtained through a bank. However, if there is no sales revenue or the credit rating is too low to determine a loan limit, the loan cannot be granted.

At CGF, guarantee officers review the applicant's credit rating, sales, and business conditions and conduct on-site inspections. For the COVID-19 special guarantee applications accepted since the 14th of last month, on-site inspections have been waived. The guarantee review process usually takes about two weeks, but since the waiver of on-site inspections, it is expected to take about one week.

The problem is that the workforce available to conduct reviews is severely insufficient compared to the number of loan applications, which may delay the process by more than a month. Especially in regions like Daegu and Gyeongbuk, which were directly hit by the COVID-19 outbreak, this period may be even longer. This is why small business owners, who are in urgent need, are voicing their frustrations.

Lee Geunjae, head of the Jongno District branch of the Korea Foodservice Industry Association, said, "Government financial support is not something that can be received quickly; it will take several months, and in that time, small restaurant owners will all close down." He added, "Even without sales, labor costs, material costs, rent, and taxes continue to be paid one after another. If this situation continues and financial support is not received, there is no choice but to close."

A CGF official explained, "Currently, about 700 guarantee officers at the Seoul headquarters and 12 regional offices are conducting guarantee review work. Since the COVID-19 outbreak, we have urgently reinforced temporary staff and are simultaneously conducting outsourced guarantee consultations in cooperation with banks."

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