Half of Small and Medium Enterprises Say "Difficult to Secure External Funding This Year"

Increased Short-Term Cost Funding Demand for SMEs, Expectation of Worsening Financing Conditions

[Asia Economy Reporter Park Sun-mi] It was found that 70% of small and medium-sized enterprises (SMEs) reported that their business conditions this year have worsened compared to last year, showing sluggish performance, and about half of them reported difficulties in external financing conditions.

On the 14th, IBK Economic Research Institute conducted a survey targeting 4,160 SMEs with fewer than 300 employees and announced the ‘2020 SME Financial Status Survey,’ which showed that the business outlook for 2020 was ‘sluggish’ at 70.7%, accounting for more than half.

The proportion of respondents who answered that the 2020 business conditions would ‘improve’ was only 5.0%. In particular, opinions that the service and manufacturing sectors would be more ‘sluggish’ than the construction sector were high. Also, smaller enterprises tended to have a relatively higher expectation of ‘sluggish’ business conditions compared to medium-sized enterprises.

The survey results showed that 42.8% of SMEs planned conservative fund management due to future economic uncertainties. The proportion of companies planning conservative fund management had remained around 20% since 2016 but rose to about 40% this year. This also showed that the smaller the company size, the more conservative the fund management plans. The most common reason for planning conservative fund management was a decrease in sales (97.5%).

Due to sluggish business conditions, 42.6% of companies expected worsening external financing conditions, an increase of 22.1 percentage points compared to the previous year. In particular, 45.4% of companies in the service sector anticipated worsening conditions, higher than the overall average.

The total planned scale of external financing this year was KRW 43.3342 trillion, with banks accounting for 87.3% of this amount. Among the external financing plans for this year, operating funds accounted for 74.4%, and facility funds accounted for 25.6%. The demand for new funds for short-term expenses such as rent payments and repayment of principal and interest on existing loans also increased by 7.6 percentage points and 10.3 percentage points, respectively, compared to the previous year.

Meanwhile, IBK Economic Research Institute annually surveys about 4,500 SMEs nationwide with 5 to fewer than 300 employees on business conditions, fund outlook, financing status, and satisfaction with financial institutions, and publishes the SME Financial Status Survey results. The survey (field investigation) period for this year was from May to July.

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