7 out of 10 SMEs Face Financial Difficulties During Chuseok

Korea Federation of SMEs 'This Year Chuseok Fund Demand Survey' Results

[Asia Economy Reporter Moon Hyewon] Seven out of ten domestic small and medium-sized enterprises (SMEs) reported difficulties in securing funds for Chuseok, according to a survey.

The Korea Federation of SMEs announced on the 17th that, based on the results of the "2020 SME Chuseok Fund Demand Survey" conducted from the 27th of last month to the 8th of this month targeting 1,075 SMEs, 67.6% of the responding SMEs reported financial difficulties.

This represents a 12.6 percentage point increase compared to the 55.0% of companies experiencing fund difficulties during last year's Chuseok. The worsening of Chuseok fund conditions is attributed to decreased sales caused by the COVID-19 pandemic and increased financial strain due to employee bonuses and other payments.

Regarding the causes of financial difficulties (multiple responses allowed), "poor sales due to social distancing measures" was the most cited at 86.9%, followed by "delayed collection of sales proceeds" at 30.1%, and "rising labor costs" at 23.6%.

This year, SMEs require an average of 246.3 million KRW in funds for Chuseok. Of the required funds, the amount not secured and thus insufficient is 68.9 million KRW, representing a shortage rate of 28.0% relative to the required funds.

Regarding plans to secure Chuseok funds, responses were "no measures" (42.5%), "payment deferral" (38.7%), "early collection of delivery payments" (35.3%), and "borrowing from financial institutions" (31.0%), in that order.

The percentage of companies planning to pay Chuseok bonuses (in cash) this year is 47.3%, down 8.1 percentage points from last year's 55.4%. Companies paying bonuses as a percentage of base salary reported an average of 49.9%, while those paying a fixed amount reported an average of 581,000 KRW.

The average planned duration of the Chuseok holiday was 4.7 days.

Chumun Gap, head of the Economic Policy Division at the Korea Federation of SMEs, stated, "Along with the damage caused by COVID-19, financial difficulties related to Chuseok funds are overlapping, causing a double hardship on the ground. The financial situation of SMEs appears to be continuously worsening due to domestic demand contraction caused by COVID-19, increased external uncertainties, sluggish investment, and export downturns."

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