Busan City Adds ‘＋α’ to Policy Financial Support for Small and Medium Enterprises

Interest Rate Reduction on Development Funds from 3.7% to 3.3% and Maturity Repayment Extension Support
Increase in Operating Fund Support Frequency from 3 to 4 Times, Expansion of Repayment Condition Options

Policy fund support measures prepared by Busan City.

[Asia Economy Yeongnam Reporting Headquarters Reporter Kim Yong-woo] Busan City has announced measures to strengthen policy financing support for small and medium-sized enterprises (SMEs), including interest rate cuts, maturity extensions, and increased frequency of working capital support.

On the 26th, Busan City stated that it will revise its policy fund plans to increase support benefits to alleviate the financial burden on local SMEs struggling with funding difficulties due to the novel coronavirus disease (COVID-19).

Specific support measures include lowering the interest rate on development funds from 3.7% to 3.3% (-0.4%), a one-year maturity extension for special guarantees on shipbuilding and marine equipment due in 2020, a one-year repayment extension for development funds maturing in 2020, a one-year maturity extension for special funds for small business owners maturing in 2020, expanding repayment condition options for SME development and working capital funds, and increasing the number of working capital support instances from three to four.

In March, the city proactively responded to COVID-19 by establishing 200 billion KRW in funds such as small business management stabilization funds and special rental funds for small business owners. The credit rating for special guarantees for automobile parts companies was relaxed from B- to CCC-, and interest rates for startup special funds and facility funds were reduced from the 2% range to the 1% range. On May 14, the province held the 3rd Economic Revitalization Strategy Meeting and announced expanded liquidity support for companies in preparation for the post-COVID era. As a follow-up, this financial support plan was prepared with more flexible measures such as interest rate cuts, maturity extensions, and eased funding conditions.

For development funds, the interest rate will be reduced by 0.4 percentage points from 3.7% to 3.3%. Considering Busan City's 0.8% secondary interest subsidy, the actual burden on companies will decrease from 2.9% to 2.5%, thereby promoting new investments by lowering the relatively high perceived interest rate on development funds. The currently supported secondary interest subsidy of 0.8% to 1.1% (preferential) will remain unchanged, so the actual benefits perceived by companies are expected to be significant.

Regarding special guarantees for shipbuilding and marine equipment, Busan's key industries, the maturity due this year will be extended by one year considering the decrease in cargo volume, the downturn in the shipbuilding industry, and domestic and international economic conditions. Approximately 60 companies are expected to benefit from about 16.5 billion KRW.

For development funds with installment repayments due this year (loans from 2017), the principal repayment period will be extended by one year within the total eight-year maturity, reducing the burden for 143 companies by about 89.8 billion KRW.

For special funds for small business owners maturing this year, a one-year maturity extension will reduce the burden for about 1,400 companies by approximately 30.9 billion KRW. The secondary interest subsidy during the extension period will continue to be provided at 0.8% to 1.7% (preferential for startups under three years).

Busan City's Policy Fund Support Condition Relaxation Measures.

Applications for maturity (repayment) extensions require approval from the guarantee institution and the financial institution handling the loan for the extension of repayment or maturity by one year. Before applying, it is essential to confirm the possibility of extension with the relevant institution.

To facilitate smooth fund management for SMEs, repayment conditions for development funds for new applications will be expanded to include '4 years grace period and 4 years installment repayment' in addition to the existing '3 years grace period and 5 years installment repayment.' For working capital funds, repayment options will be expanded to include '2 years grace period and 1 year installment repayment' in addition to the existing '3 years lump-sum repayment,' broadening the choices for companies. The number of working capital support instances will be increased from three to a maximum of four, allowing companies to receive policy fund support for up to 12 years.

Byun Sung-wan, Acting Mayor of Busan, said, "We hope this policy fund revision plan will help stabilize the management of local SMEs experiencing financial difficulties."

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