Small Business Second Round Financial Support Interest Rate Reduced by Up to 2%p... Additional 10 Million Won Support

From applications received on the 18th, the interest rate for the 2nd financial support program is reduced by up to 2%p
Additional loans of up to 10 million KRW available for small business tenants in restricted gathering industries

[Asia Economy Reporter Jo Gang-wook] Starting from the 18th, the maximum interest rate for the second financial support program for small business owners will be reduced by up to 2 percentage points. Additionally, a special support program allowing up to an additional 10 million KRW loan will begin for small business owners in restricted gathering industries who are tenants.

The Financial Services Commission announced on the 14th that, in response to the strengthened government and local government quarantine measures due to the third wave of the novel coronavirus infection (COVID-19) and prolonged financial difficulties, it will reorganize and establish the "Small Business Financial Support Program" in consultation with the banking sector based on these details.

The Financial Services Commission explained, "Due to the continued third wave of COVID-19 and the strengthening of social distancing measures, small business owners are experiencing ongoing financial difficulties such as decreased sales," adding, "The preferential benefits of the second financial support program for small business owners have been increased, and a special support program has been established to alleviate rental burdens for small business owners in industries with gathering restrictions."

According to this reorganization, the reduced interest rates and guarantee fees will apply to applications for the "Second Financial Support Program for Small Business Owners" submitted from the 18th onward.

Previously, the banking sector lowered the maximum interest rate from 4.99% to 3.99% by 1 percentage point on December 29 last year. Especially with this reorganization, Kookmin, Shinhan, Woori, Hana, Nonghyup, and Industrial Banks plan to further reduce the rate by 1 percentage point to operate at interest rates in the 2% range.

The Financial Services Commission stated, "The banking sector plans to voluntarily lower interest rates as much as possible to share the difficulties of small business owners who have participated in COVID-19 prevention," and added, "Since the specific interest rate levels vary somewhat depending on the customer and bank, inquiries should be made directly to the banks."

The guarantee fee for the 5-year loan period (2 years grace period, 3 years installment repayment) will be reduced by 0.6 percentage points from the existing 0.9% to 0.3% for the first year. The rate for years 2 to 5 remains at 0.9%.

Separately, small business owners in restricted gathering industries who are tenants will be able to receive an additional loan of up to 10 million KRW. The restricted gathering industries include five types under social distancing level 2: restaurants and cafes, indoor sports facilities, karaoke rooms, direct sales promotion centers, and standing performance venues. Under social distancing level 2.5+α, the list expands to 11 types: 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.

The support targets are small business owners (individual business operators) in restricted gathering (=business restriction) industries who are eligible to apply for the 2 million KRW portion of the Support Fund, which began disbursement on the 11th.

Among them, individual business owner small business owners who currently have lease contracts can apply for an additional loan of up to 10 million KRW regardless of whether they have used the existing small business financial support program.

The guarantee fee for the 5-year loan period (2 years grace period, 3 years installment repayment) will be fully waived for the first year, and a fixed 0.6% guarantee fee rate will apply for years 2 to 5. Interest rates are expected to be in the 2% range at major commercial banks and in the 2-3% range elsewhere.

The Financial Services Commission is currently conducting a final check on the system construction status of 12 commercial and regional banks, including Kookmin, Nonghyup, Shinhan, Woori, Hana, Industrial, Gyeongnam, Gwangju, Daegu, Busan, Jeonbuk, and Jeju Banks, which are implementing the second program. Applications for the reorganized and newly established programs will be available from the 18th.

Meanwhile, the small business financial support program was prepared in two phases in March and April last year, with scales of 16.4 trillion KRW and 10 trillion KRW respectively. According to the Financial Services Commission, as of the 7th, 18.3 trillion KRW in funds have been supplied to about 790,000 small business owners facing difficulties (560,173 in the first phase, 224,190 in the second phase).

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