[Q&A] 10 Million Won Low-Interest Loan for Restricted Gathering Businesses... When Can It Be Received?

Banks to Provide Special Support for Tenant Small Businesses in Restricted Sectors
Additional Loan of 10 Million KRW Possible Regardless of Existing Programs
Loan Applications Expected to Open from January 18 Next Year

[Asia Economy Reporter Jo Gang-wook] Small business owners who rent premises in restricted gathering industries such as restaurants and cafes will be eligible for an additional loan of up to 10 million KRW. This is a newly established financial support program for small business owners in response to the third wave of the novel coronavirus infection (COVID-19).

On the 29th, the Financial Services Commission announced the establishment of a special support program that provides an additional loan of up to 10 million KRW to small business owners renting premises in restricted gathering industries, regardless of whether they have used existing small business financial support programs. This program offers a loan with a 2-year grace period and a 3-year installment repayment plan. The first year’s guarantee fee is waived, and from the following year through the fifth year, a low guarantee fee rate of 0.6% is applied.

This is at the same interest rate level as the second small business financial support program, and banks are currently reviewing measures to voluntarily lower the interest rate ceiling.

The support targets small business owners renting premises in restricted gathering industries. The restricted gathering industries under social distancing level 2 include five types: restaurants and cafes, indoor sports facilities, karaoke rooms, direct sales promotion centers, and standing performance venues.

Below is a Q&A regarding the newly established financial support program.

- What are the newly established and expanded contents of the small business financial support announced this time?

▶ The 'Second Small Business Financial Support Program' will be expanded and reorganized. Part of the guarantee fee (annual 0.9%) will be reduced, and banks are reviewing measures to voluntarily lower the interest rate ceiling. The existing second small business financial support program targeted all small business owners (individual business operators) with a support limit of up to 20 million KRW (2-year grace period, 3-year installment repayment). The existing guarantee fee was 0.9%, but under the reorganization, it will change to 0.3% for the first year and 0.9% for years 2 to 5.

A 'Special Support Program for Small Business Owners Renting Premises in Restricted Gathering Industries' will be newly established. Small business owners renting premises in restricted gathering industries can apply for an additional loan of up to 10 million KRW regardless of their use of existing small business financial support programs. The loan (2-year grace period, 3-year installment repayment) waives the guarantee fee in the first year, and from the following year through the fifth year, a low guarantee fee rate of 0.6% is applied. This is the same interest rate level as the 'Second Small Business Financial Support Program.'

- Who are the eligible recipients of the special support program for small business owners renting premises in restricted gathering industries?

▶ Under social distancing level 2, the restricted gathering industries included five types: restaurants and cafes, indoor sports facilities, karaoke rooms, direct sales promotion centers, and standing performance venues. Currently, under social distancing level 2.5+α, the restricted gathering industries have expanded to 11 types, including restaurants and cafes, beauty salons, PC rooms, arcades and multi-rooms, study cafes, movie theaters, amusement parks, large marts and department stores, and lodging businesses. Small business owners renting premises in these restricted gathering industries according to these levels are eligible.

- When will this be implemented?

▶ We are preparing to complete practical preparations such as bank IT system setup quickly so that loan applications can start around January 18 next year. Detailed information related to loan implementation will be separately announced once practical preparations are completed.

- Can small business owners who have used the existing 'Second Small Business Financial Support Program' also apply?

▶ Yes. Small business owners renting premises in restricted gathering industries can apply for up to 10 million KRW regardless of their use of existing financial support programs. Overlapping applications with the existing 'Second Small Business Financial Support Program' are also possible. The order of use does not matter.

- What is the application procedure?

▶ You can first use bank branch counters. Applications can be made at 6,121 branches nationwide of 12 commercial and regional banks (Kookmin, Nonghyup, Shinhan, Woori, Hana, Gyeongnam, Gwangju, Daegu, Busan, Jeonbuk, Jeju, and Industrial Bank of Korea) currently handling the 'Second Small Business Financial Support Program.'

Non-face-to-face channels via each bank’s website or application (app) are also available. Among the 12 commercial and regional banks, 9 banks (Kookmin, Nonghyup, Shinhan, Woori, Hana, Gwangju, Daegu, Busan, Industrial Bank of Korea) allow non-face-to-face applications through their websites and apps. Among these, 5 banks (Kookmin, Shinhan, Woori, Daegu, Industrial Bank of Korea) also offer non-face-to-face loans.

- What documents are required for application?

▶ Six documents are required: business registration certificate, VAT taxable standard certificate, national and local tax payment certificates, real estate registry copy (or lease contract), income amount certificate, etc. However, additional documents and procedures necessary to verify eligibility as a small business owner renting premises in restricted gathering industries will be announced after consultation with related ministries and agencies when detailed information is disclosed.

- Is there concern about congestion at application counters due to concentrated applications from small business owners?

▶ Applications can be made at nationwide branches of 12 commercial banks, and non-face-to-face applications are possible at 9 banks, so congestion concerns are expected to be low. However, due to current COVID-19 prevention measures limiting waiting to fewer than 10 people inside bank branches and strengthened distancing between counters, some regions and times may experience customer congestion. Therefore, it is recommended to actively use non-face-to-face applications first and check waiting conditions in advance before visiting branches.

- There are demands for reduction of banks’ interest rate margins. What is the response?

▶ Banks themselves are actively working to overcome the COVID-19 crisis and are expected to announce interest rate reduction measures for small business owners within today.

- When will the newly reduced guarantee fees and interest rates be applied?

▶ They are expected to be applied from the start date of applications for the 'Special Support Program for Small Business Owners Renting Premises in Restricted Gathering Industries,' around January 18 next year. Considering the time required for bank IT system setup, applications received before January 18 next year will be subject to existing support conditions.

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