Government Provides 95% Guarantee on Second COVID Loans... Expansion of Loans for Medium and Low Credit Borrowers Expected

On the 1st, a small business owner affected by the spread of the novel coronavirus (COVID-19) is receiving loan consultation at a commercial bank in Seoul, where a bank loan product was launched for small business owners impacted by the pandemic. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Haeyoung Kwon] The government has decided to provide guarantees for 95% of the second round of emergency loans for small business owners, which will be launched by commercial banks this month. Even if loan defaults occur, the banks' burden will be alleviated, which is expected to expand lending to medium- and low-credit borrowers.

According to the financial sector on the 10th, the Korea Credit Guarantee Fund (KODIT) will support guarantees for 95% of the second round of emergency loans for small business owners, with applications accepted starting on the 18th.

For example, if a small business owner receives an emergency loan of 10 million KRW, KODIT will guarantee 9.5 million KRW, and if the borrower fails to repay the loan, KODIT will repay 9.5 million KRW to the bank on their behalf. Accordingly, even those with low credit are expected to be able to receive funds from commercial banks through the second round of emergency loans for small business owners.

In the first round of emergency loans for small business owners executed by early this month, the government distributed loan channels based on credit ratings: high-credit borrowers with credit ratings 1 to 3 used commercial banks, medium-credit borrowers with ratings 4 to 6 used IBK Industrial Bank of Korea, and low-credit borrowers with ratings 7 and below used the Small Enterprise and Market Service (SEMAS).

In the second round of emergency loans for small business owners, the loan channels will be unified to six banks?KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, and IBK Industrial Bank of Korea?while expanding government guarantees to supply funds to medium- and low-credit borrowers. It is expected that bank loans will expand to around credit rating 8. To prevent speculative demand, interest rates will rise from the previous 1.5% to 3-4% for medium-credit borrowers. The loan limit is 10 million KRW per case.

However, those who received the first round of emergency loans for small business owners, those with existing loan delinquencies, or those with overdue national or local taxes are not eligible to receive the second round of emergency loans for small business owners.

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