Government: "Small Business Loans to Expand to Commercial Banks... 'Odd-Even System' Implemented to Resolve Bottlenecks (Comprehensive)"

Government Announces Measures for Rapid Execution of Financial Support for Small Business Owners

Kim Yong-beom, the 1st Vice Minister of the Ministry of Economy and Finance, held a joint briefing with the Financial Services Commission and the Ministry of SMEs and Startups at the Government Complex Sejong on the 27th, announcing the "Rapid Execution Plan for Financial Support to Small Business Owners in Response to COVID-19."

[Asia Economy Reporters Joo Sang-don and Jang Se-hee] The government has decided to expand loan channels and implement an odd-even system based on birth years to provide faster financial support to small business owners affected by the novel coronavirus infection (COVID-19).

On the 27th, at the Government Complex Sejong, the Ministry of Economy and Finance held a joint briefing with the Financial Services Commission and the Ministry of SMEs and Startups to announce the "Rapid Execution Plan for Financial Support to Small Business Owners in Response to COVID-19," which includes these measures.

At the briefing, Kim Yong-beom, the first vice minister of the Ministry of Economy and Finance, explained, "When bottlenecks occur on roads, the solution is to widen the roads, provide timely information to drivers, and have support personnel like traffic police respond appropriately to the situation. We will address bottlenecks in the financial support process for small business owners in the same way."

First, starting from April 1, the government will accept applications for emergency management fund loans at an annual interest rate of 1.5% from all commercial banks and the Industrial Bank of Korea for small-scale small business owners and self-employed individuals in retail, food service, lodging, and other sectors. Using this, loans can be received within five days after application, and loans are available without guarantee fees (around 0.5?0.8%).

Additionally, from April 1, the "10 million KRW Direct Loan" program, which provides loans of 10 million KRW without guarantees to small business owners with credit ratings of grade 4 or lower at 62 regional centers of the Small Enterprise and Market Service (SEMAS), will operate an odd-even system based on birth years. On odd-numbered days, those born in odd years can apply, and on even-numbered days, those born in even years can apply.

The government plans to entrust the screening of ultra-low interest small loans of up to 30 million KRW, totaling 5.8 trillion KRW, to regional credit guarantee foundations (Jisinbo) starting April 6. This simultaneous loan and guarantee process aims to shorten the execution period to about five days. However, it is expected that 2?3 weeks after implementation will be needed to clear accumulated volumes, with processing times returning to around five days by late April. Also, within this month, inter-agency agreements will be revised so that the Korea Credit Guarantee Fund (KODIT) and the Korea Technology Finance Corporation (KIBO) actively provide guarantees for ultra-low interest loans.

Since the 25th, the Small Enterprise Fund's management stabilization fund, which only handles credit ratings of grade 4 or lower, will be unified into the "SEMAS 10 million KRW Direct Loan" instead of proxy loans through banks. At this time, high-credit borrowers (grades 1?3) will be actively guided to use other products through SEMAS.

Efforts will also be made to establish a demand-centered information provision and work system. Small business owners will be encouraged to pre-check their credit ratings before applying for loans to visit the most suitable lending institutions. Online NICE evaluation information allows one free credit rating inquiry every four months, and the Small Business Support Center offers free pre-credit rating checks.

Monitoring of execution status will be conducted by the Financial Services Commission for interest subsidy loans (commercial banks) and ultra-low interest loans (KIBO), and by the Ministry of SMEs and Startups for management stabilization funds (SEMAS). A cooperation system will be established to promptly resolve field difficulties, focusing on Jisinbo, where bottlenecks are concentrated. To expand guarantee supply by regional foundations, the central association’s re-guarantee ratio will be raised from 50% to 60%, and the guarantee supply scale will be increased by 2.3 trillion KRW.

In addition, SEMAS, KIBO, and commercial banks will require documents such as a "confirmation form to prevent duplicate support" to avoid overlapping fund reception, and will provide prior notice that those who receive duplicate support through fraudulent means may face disadvantages.

Vice Minister Kim said, "Since the channels, handling institutions, and guarantee organizations will be significantly expanded compared to now, bottlenecks will improve quickly. However, since these measures will not all be fully implemented at once but will be phased in on April 1, April 6, and so on, congestion similar to the current situation is expected to continue for about one to two weeks."

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