Export Company Support Policy, 'From Liquidity Preservation to Ecosystem Protection'

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] The government's support for export companies is shifting from short-term liquidity fund replenishment to protecting the industrial ecosystem. Policies are being strengthened to open up ways for companies to secure large-scale funds from financial institutions on a short-term basis, and financial institutions and large corporations are jointly providing financial support to prevent the bankruptcy of partner companies. This is a measure to reduce the risk for financial institutions and enable more long-term and active financial support for export companies.

On the 19th, the government announced that it will provide financial support worth 'KRW 2 trillion + α', mainly targeting auto parts companies with low credit ratings. The tailored support for low credit rating and mid-sized companies stands out.

The government has consistently sent messages that it is considering support for low credit rating companies. However, the fact that finished car manufacturers and financial institutions will jointly provide support is new.

This is to reduce the risk for the institutions providing the funds, but in other words, it also indicates that liquidity support for export companies is viewed as a long-term task.

The policies include special guarantees, preferential interest rate loans, priority support for credit-vulnerable companies, loans secured by overseas assets, loans secured by accounts receivable, and maturity extension support from commercial banks.

A notable program is the 'Project Joint Guarantee' worth KRW 30 billion.

This financial support lowers the thresholds for partner companies' sales and credit rating assessments so that finished car manufacturers can efficiently supply funds directly to their partner companies.

It is also noteworthy that a path has been opened to obtain loans in the financial market by securing assets as collateral. This addresses the difficulties faced by export companies with technological capabilities but low credit ratings in raising funds.

Korea Asset Management Corporation (KAMCO) will support accounts receivable secured loans to partner companies through a subordinated loan-type private equity fund (PDF) method.

About 20 primary partner companies will be able to raise funds using the accounts receivable of finished car manufacturers as collateral.

In emergencies, parts companies will be helped to use assets held by overseas subsidiaries as loan collateral.

Previously, it was difficult to obtain domestic bank loans without a joint guarantee from the parent company (parts company), but now assets can be used as collateral through overseas subsidiaries of the Export-Import Bank of Korea in countries such as Vietnam and Indonesia.

This is a more proactive alternative than policies that increase budgets for trade finance, where institutions like the Korea Trade Insurance Corporation provide guarantees if contract issues arise.

It is a policy that helps companies raise funds from financial institutions on their own without going through institutional guarantees.

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