Support for Small Business Owners Affected by COVID-19: Temporary Repayment Deferral After Closure

'175 Trillion Won+@ Program' Also Implemented Without Delay

[Asia Economy Reporter Park Sun-mi] Following the financial authorities' continued policy of financial support to overcome the COVID-19 crisis, small business owners will be able to receive support that allows temporary repayment burdens to be deferred until the loan maturity date even after business closure.

On the 8th, the Financial Services Commission decided at the first meeting of the Financial Development Council's Policy and Global Finance Subcommittee to steadily implement the "175 trillion won +@" program, considering the ongoing difficulties faced by small business owners and companies due to the resurgence of COVID-19. Financial burden relief measures such as reduced guarantee fees will be promoted for small business owners subject to gathering restrictions (3 trillion won) and general damage small business owners (3.6 trillion won). In addition, the operating period of the period industry cooperation partner support program will be extended by about three months (from early February to the end of April), and the application deadline for the Period Industry Stabilization Fund, originally set for the end of April, will also be extended.

A COVID-19 financial support field inspection team has been newly established to ensure prompt support for small business owners and companies. In particular, considering the increase in business closures among small business owners amid ongoing difficulties caused by COVID-19, support will be provided so that temporary repayment burdens can be deferred until the original loan maturity date even after business closure.

Previously, the Korea Credit Guarantee Fund (KODIT) proceeded with bad debt processing procedures such as provisional seizure when small business owners closed their businesses, and banks recalled loans in full if KODIT applied for provisional seizure. However, if small business owners who received loans through KODIT guarantees are repaying principal and interest normally, the policy will be improved so that they do not need to make lump-sum repayments even if they close their businesses for the time being, thereby alleviating the difficulties faced by small business owners due to COVID-19. KODIT will temporarily defer bad debt processing for "small business owners who closed their businesses without principal and interest arrears" from the 15th of this month until September 30, and banks will be able to maintain loans until maturity for those closed small business owners.

Financial potential risks that inevitably increase during the COVID-19 response process will be more strictly managed. The Financial Services Commission plans to prepare an "Advanced Household Debt Management Plan" within the first quarter, which includes establishing a loan screening practice focused on repayment ability and strengthening management of large credit loans, so that rapid household debt management does not become a burden on the Korean economy. They will select and index macro, industrial, and financial indicators that can check corporate debt risk factors, and for companies experiencing structural difficulties during environmental changes, they will also induce business restructuring support and proactive restructuring.

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