Daegu City to Provide Additional 1 Trillion Won in 'Post-Corona' Business Stabilization Fund

Following the 1.2 Trillion KRW Support in the First Half... Accounts Receivable Insurance Acquisition Scale Doubled from Initial Plan

[Asia Economy Yeongnam Reporting Headquarters Reporter Park Dong-wook] Daegu City announced on the 3rd that it will expand the scale of management stabilization funds by 1 trillion KRW to a total of 2.2 trillion KRW, the largest in the nation, to overcome the economic crisis caused by the novel coronavirus infection (COVID-19) and proactively respond to the post-COVID era.

Along with this, the scale of accounts receivable insurance underwriting to prevent chain bankruptcies caused by transaction damages to small and medium-sized enterprises (SMEs) will be doubled from the previous amount to 260 billion KRW.

Daegu City expanded the management stabilization funds from the initial 800 billion KRW (including the second half of the year) to 1.2 trillion KRW through the first supplementary budget in April, but as the demand for funds from companies and small business owners continued, 94% (1.1259 trillion KRW) had already been used as of July 27. Accordingly, Daegu City explained that it will expand the second supplementary budget support by 1 trillion KRW (with an increase of 5.2 billion KRW in project expenses) for second-half fund support and implement it from the 4th.

The management stabilization fund support is a program where Daegu City recommends local SMEs and small business owners to receive working capital loans at low interest rates from commercial banks and supports part of the loan interest. Depending on the loan amount and preferential status, loan interest can be supported at rates from 1.3% to 2.2% for one year.

The emergency management stabilization funds for SMEs and small business owners whose sales have decreased by more than 10% compared to before have been expanded to 200 billion KRW (previously 100 billion KRW), with a special preferential application of a 0.4%p interest subsidy rate.

In particular, with this expansion of management stabilization funds, 300 billion KRW has been allocated to local mid-sized enterprises for new support. In June, the "Daegu City SME Management Stabilization Fund Support and Operation Ordinance," which includes mid-sized enterprises as eligible for management stabilization funds in cases of serious management difficulties due to disasters, was amended (effective July 10) following the representative proposal by Daegu City Council member Hong In-pyo, establishing the basis for funding support for mid-sized enterprises.

Mid-sized enterprises, which are facing increasing difficulties in business activities due to the economic shock of COVID-19, can only receive limited support from some financial institutions such as the Korea Development Bank and the Export-Import Bank, and are mostly excluded from various financial supports from the government and local governments. Regarding this, Daegu City emphasized that since mid-sized enterprises play a pivotal role connecting large enterprises and SMEs, weakening them could lead to a serious situation where the entire regional industrial structure becomes vulnerable. Therefore, Daegu City decided to be the first local government to provide management stabilization funds to mid-sized enterprises.

The support target for mid-sized enterprises includes 111 companies in the region, with a support scale of 300 billion KRW. The limit per company is 5 billion KRW, and interest support ranges from 1.3% to 1.7% for one year.

Daegu City will also expand the support for accounts receivable insurance premiums to prevent risks from chain insolvencies of local SMEs’ trading partners and to secure transaction stability by increasing the underwriting scale by 130 billion KRW to a total of 260 billion KRW. Accounts receivable insurance is a public insurance system supporting SMEs, operated by the Korea Credit Guarantee Fund under the commission of the Ministry of SMEs and Startups.

Hong Eui-rak, Deputy Mayor for Economic Affairs of Daegu City, said, "We expect that the expanded support of management stabilization funds, including local mid-sized enterprises, SMEs, and small business owners, will provide more momentum to overcome the economic crisis caused by COVID-19," adding, "We will proactively establish and implement comprehensive economic measures to prepare for the post-COVID era, focusing all efforts on early overcoming of the economic crisis and regional economic growth."

Detailed information regarding the SME management stabilization funds can be found on the Daegu City website.

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