Surge in Inquiries for Small Business Second Loans at 2% Interest Rate... "The Process Is Complicated"

'Annual 2% Range' Loan Launch Sparks Surge in Phone Inquiries
Four Major Banks Receive 1,483 Small Business Second Loan Applications in Two Days, About 25 Billion KRW
Customers Ask About Differences from Existing Products or Complain About Complex Application Documents

[Asia Economy Reporters Sunmi Park, Kiho Sung]"Since last Monday, we've been overwhelmed handling phone inquiries about the second round of small business loans with interest rates in the 2% range. Most questions are about the documents required for preparation. Many customers who are not fully aware of the loan conditions inquire by phone and then apply online, and this trend seems likely to increase." (Team Leader, A Bank Dongdaemun Branch)

Since the launch of the 'annual 2% range' second loan support for small business owners affected by COVID-19 on the 18th, branches of commercial banks nationwide have been flooded with phone inquiries. The demand from self-employed individuals thirsty for funds has increased because small business tenants in restricted industries can receive an additional loan of 10 million KRW at a low interest rate.

Most applications are made online through non-face-to-face channels, so the number of customers visiting branches has not significantly increased. However, the influx of calls from customers asking about differences from existing products or expressing dissatisfaction with complicated application documents indicates that the program has successfully attracted attention.

According to the financial sector on the 21st, in the two days following the implementation of the newly established and revised small business financial support program on the 18th, the four major domestic commercial banks executed a total of 1,483 small business second loans amounting to approximately 25 billion KRW. Two banks reported that the number of second loans for small businesses increased 3 to 4 times compared to a week earlier. The average daily number of small business second loans over the past 10 business days at the four major banks was 522, whereas on the 18th and 19th, the average daily number rose to 741.

What is the atmosphere at branches regarding the second small business loans?

The second small business loans with interest rates in the 2% range allow non-face-to-face applications considering the COVID-19 situation, so branches maintain a relatively calm atmosphere. However, phone inquiries from small business owners who heard about the possibility of additional loans continue. A representative from B Bank’s branch in Mapo said, "The volume of loan inquiry calls has increased by more than 10% compared to before the 18th," adding, "Small business owners from various industries, ranging from chicken restaurants to PC rooms, are making inquiries."

They continued, "Most customers have experience receiving loans through the first and second rounds of small business loans, so they do not complain much about online applications," and predicted, "Judging by the level of inquiries, the number of online loan applications will clearly increase."

Confusion at the field level continues as well. The biggest issue is selecting eligible loan recipients.

In the newly established special support program for tenants of restricted industries, banks require loan applicants to submit a ‘200,000 KRW Support Fund Payment Confirmation’ to verify if they belong to the restricted industry category. Previously, the Ministry of SMEs and Startups has been providing 200,000 KRW support funds to small business owners in restricted industries since the 11th. However, many have been excluded from the support fund, and reapplications will begin on the 25th for those omitted. As a result, small business owners who did not receive the support fund on time cannot apply for the special loan either.

Attractive interest rates... "Let's apply first" mood

Despite this, the flood of inquiries is due to the attractive interest rates. The maximum interest rate for the second loan is 3.99% per annum, down 1 percentage point from the previous 4.99%. The five major commercial banks and Industrial Bank of Korea have further reduced the rate by 1 percentage point, applying a uniform interest rate in the 2% range.

Additionally, government authorities are tightening household loans due to concerns about excessive debt increases, creating a sentiment of "If loans are available, better to get them first." The financial authorities plan to announce detailed household debt management measures in March after gathering opinions from the financial sector and reviewing various policy alternatives in January and February. They are also considering mandatory principal installment repayments for credit loans above a certain amount, which could make general household loans more difficult to obtain.

Separately from household loan management, financial authorities have expressed their intention to actively support small business owners affected by COVID-19. Financial Services Commission Chairman Eun Sung-soo visited major commercial bank branches in person the day before to encourage smooth implementation of the second small business loan support program. Chairman Eun urged, "Since some small business owners who opened last year and those subject to local government business restrictions have not yet received the support fund, please ensure that the special support program for tenants in restricted industries is implemented without any issues."

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