Reducing 2.7 Trillion Won in Financial Costs for Small Business Owners with Local Credit Guarantee

[Asia Economy Reporter Kim Cheol-hyun] It has been analyzed that the Regional Credit Guarantee Foundation (hereinafter referred to as Regional Shinbo) reduced financial costs for small business owners by 2.7 trillion KRW last year through credit guarantees. On the 1st, the Korea Credit Guarantee Foundation (Chairman Kim Byung-geun) disclosed the results of the "2020 Small Enterprise and Small Business Credit Guarantee Support Effect Survey" conducted on 3,324 people who received credit guarantees from Regional Shinbo, revealing this.

According to the Korea Credit Guarantee Foundation, small-scale small business owners experienced financial exclusion from commercial banks (primary financial institutions). Assuming that new credit guarantee borrowers used household credit loans from secondary financial institutions instead of Regional Shinbo, it is estimated that an additional total cost of 2.7331 trillion KRW would have been incurred. Through a total of 22.7394 trillion KRW in credit guarantees supported by 16 Regional Shinbo offices in 2020, a maximum interest cost reduction effect of 2.7331 trillion KRW was generated. A representative from the Korea Credit Guarantee Foundation explained, "Although small business owners faced many difficulties due to COVID-19 over the past year, companies that received credit guarantees have been greatly helped in improving management and reducing financial costs through the credit guarantees."

Challenges in Business Management in 2020

Also, when examining the difficulties faced in business management during 2020, 'sales decline' was the highest at 72.9%, followed by 'funding procurement' (34.4%), and 'securing manpower and rising labor costs' (20.0%). Due to COVID-19, many small business owners experienced a decrease in sales, but after receiving guarantee support through credit guarantees, 83.8% of small business owners responded that their sales either did not change (71.6%) or increased (12.2%), indicating that at least sales did not decline. Net profit and number of employees also did not decrease for 82.8% and 91.8% of companies surveyed, respectively.

These results prove that credit guarantees have a positive impact on the survival of small business owners and the maintenance of jobs for low-income groups, demonstrating that credit guarantees play a positive role in the national economy. Many respondents also indicated that the use of credit guarantee support from Regional Shinbo contributed overall to the financial transactions of small business owners, showing significant contributions in areas such as 'financial cost reduction,' 'timely loan availability,' and 'resolution of collateral issues.'

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