Government-Backed Small Business Tenant Rent Loans Do Not Require Lump-Sum Repayment Upon Closure

1 Trillion Won Loan Program Announced on the 29th
Plans to Maintain Existing Repayment Schedule
Execution Possible as Early as the End of Next Month

[Sejong=Asia Economy Reporter Kim Hyunjung] To respond to the third wave of the novel coronavirus infection (COVID-19), the government’s planned 1 trillion won-scale policy fund loan project for small business owners will be executed in a way that reduces the repayment burden caused by business closures. This changes the previous 'lump-sum repayment' condition, which was pointed out as a significant burden for small business owners who had no choice but to close their businesses, to an 'installment payment' method according to the existing schedule.

According to the Ministry of Economy and Finance and the Ministry of SMEs and Startups on the 30th, the government decided not to impose a lump-sum repayment condition upon business closure for the 1 trillion won-scale rental fee loan program for small business owners, scheduled to be executed as early as the end of next month. This improves the policy fund execution principle that required automatic lump-sum repayment of existing loans upon business closure, as the status of 'business operator,' which was the original loan execution condition, ceases to exist upon closure.

Previously, small business owners had continuously appealed for improvements to the lump-sum repayment policy upon business closure. The main argument was that self-employed individuals, who found it difficult to endure further losses due to the prolonged spread of COVID-19, were unable to even report business closure because of the burden of lump-sum loan repayment. In mid-month, a small business owner posted a national petition stating, "If lump-sum repayment is demanded from self-employed people who have closed their businesses, they become defaulters and are driven to the brink," requesting policy improvements to defer lump-sum repayment and allow repayment according to the existing schedule.

On the 3rd, as the third wave of the novel coronavirus infection spreads, quarantine measures in the metropolitan area are being strengthened to curb the spread, and shops on Myeongdong Street in Jung-gu, Seoul are closing down. Photo by Jinhyung Kang aymsdream@

The 1 trillion won rental fee loan program announced by the government the day before reflects these concerns. It allows loan repayment according to the conditions and schedule at the time of loan execution. A Ministry of SMEs and Startups official explained, "Although loans classified as business operator loans are generally required to be repaid immediately upon business closure, this reflects the realistic difficulties considering the COVID-19 situation," adding, "We plan to allow normal repayment of loans without delinquency according to the already set schedule, such as a 2-year grace period and 3-year repayment period." However, policies regarding delinquency after business closure will be decided later through discussions with related ministries.

When announcing the disaster relief fund payment plan the day before, the government stated that it will operate a rental fee loan program worth a total of 1 trillion won targeting 100,000 business operators in prohibited gathering industries such as entertainment establishments, academies, indoor sports facilities, and karaoke rooms. The core is to provide low-interest loans at 1.9% interest using small business policy funds under the name of rental fees. The loan limit is 10 million won. Since the receipt status of the support fund, which provides up to 3 million won, must be referenced, the actual execution of this program is expected to be as early as the end of next month.

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