SMEs and Small Businesses Can Receive Guarantee Support Even If Financial Performance Is Poor, Provided Transaction Records Are Good

[Asia Economy Reporter Kim Hyo-jin] Small and medium-sized enterprises (SMEs) and small business owners can now use financial products such as credit guarantees based on commercial transaction information rather than financial performance.

On the 18th, the Financial Services Commission approved the plan for the "Credit Guarantee Fund's Credit Inquiry Business License," which centers on this content. Accordingly, the Credit Guarantee Fund plans to establish a "Korean-style Paydex" using companies' commercial transaction information such as sales and purchase frequency and payment settlement types within the first half of the year.

Even if SMEs and small business owners have high growth potential, it was difficult to receive appropriate credit evaluations and financial support if their financial performance was poor. Five credit rating agencies (CBs), including NICE D&B, evaluated creditworthiness based on annual, past performance-oriented information, and real-time payment volumes were not reflected in credit evaluations.

Provided by the Financial Services Commission

The financial authorities have been promoting the Credit Guarantee Fund's credit inquiry business license plan as one of the "key tasks for spreading innovative finance." Paydex is a concept that indexes non-financial information related to commercial credit, such as companies' payment behaviors including delinquencies, sales and purchase frequency, and is actively used in the United States.

Through the Korean-style Paydex, the Credit Guarantee Fund plans to calculate indices and grades based on non-financial information such as payment periods compared to industry averages, employment size, electricity usage, and number of business partners. Companies that make payments faster than others will receive bonus points in credit evaluations.

If the Paydex index is high, companies may receive various benefits during financial transactions. Furthermore, if commercial transaction information statistics and scores are shared in various forms, financial authorities expect that appropriate evaluations of corporate asset value will be conducted through big data analysis.

Financial companies can support funding without collateral through commercial transaction information such as companies' sales and purchases. The Financial Services Commission stated, "The existing corporate credit system will be transformed into an innovative system that enables funding based on creditworthiness and the value of accounts receivable."

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