91.5% of Mid-sized Companies Say Extension of COVID Loans and Guarantees Is Necessary

45.1% of Mid-sized Companies Say "Extension Over 1 Year Needed," Some Call for "Until End of COVID-19"
Rigid Reviews Lead to Many Cases of Application Failures at Policy Finance and Private Banks
"Short-term Credit Rating Drops Should Not Decide Mid-sized Companies' Survival," Critics Point Out

[Asia Economy Reporter Junhyung Lee] Nine out of ten medium-sized enterprises hope for the extension of COVID-19 loan and guarantee maturities and the deferral of interest repayments.

The Korea Federation of Medium-sized Enterprises (KFME) announced on the 23rd that this response was revealed through a survey on "Demand for Extension of Policy Finance Loan Maturities and Financial Difficulties of Medium-sized Enterprises." The survey was conducted from the 20th of last month to the 5th of this month, targeting 82 medium-sized enterprises.

According to the survey, 91.5% of medium-sized enterprises responded that the extension of policy finance loan and guarantee maturities and the deferral of interest repayments, which are set to end at the end of next month, are necessary. The most common answer, at 45.1%, was that the extension should be for more than one year. Additionally, 40.2% answered that considering the unpredictable post-pandemic impact, it is appropriate to extend the measures until the end of COVID-19 to stabilize corporate liquidity.

Due to the impact of COVID-19, 56.1% of medium-sized enterprises reported that their financial situation has worsened. Poor sales (39%) were cited as a reason.

While liquidity flow has deteriorated, it is expected that the demand for funds among medium-sized enterprises will not decrease. Half of the medium-sized enterprises responded that their demand has increased compared to the previous year, and 37.8% said they need at least the same amount of funds as last year. Reasons included facility investment (53.7%), raw material purchase payments (47.6%), and loan repayments (46.3%).

Furthermore, although many medium-sized enterprises partially overcame liquidity crises through policy finance and private bank loans, some expressed limitations due to conservative screening criteria. After the spread of COVID-19, 57.3% of medium-sized enterprises had experience applying for new loans from policy finance, and 53.7% from private banks.

There were cases where applications were rejected due to deteriorated credit ratings and financial conditions (9.8%) and additional collateral and guarantee requirements (4.9%). Medium-sized enterprises cited conservative screening focused on financial statements (53.7%), insufficient loan limits (41.5%), lack of collateral (34.1%), and excessive document submission requirements (23.2%) as difficulties when raising funds through policy finance.

In private banks, there were cases where loan and guarantee extensions and interest repayment deferrals were not granted due to deteriorated credit ratings and financial conditions (17.1%) and insufficient borrowing limits (9.8%). A KFME official stated, "Due to uniform standards based on size, medium-sized enterprises experience inconveniences in financial blind spots, and a financial system that excludes growth potential makes it difficult for medium-sized enterprises to receive full support."

Ban Won-ik, Executive Vice Chairman of KFME, emphasized, "The reality where a short-term credit rating downgrade determines the survival of medium-sized enterprises that will lead the post-COVID-19 era must no longer be neglected." Vice Chairman Ban added, "Policy finance authorities should make greater efforts to secure the rationality of the entire financial system that supports the survival and sustainable growth of enterprises." He also stated, "KFME will communicate more closely with the government, the National Assembly, and others to prepare support programs that improve medium-sized enterprises' access to policy finance."

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