"Preventing Credit Delinquents"... Extension of Guarantee Maturity for Small Business Owners Closing Regional Credit Guarantee Foundations

[Asia Economy Reporter Kim Bo-kyung] The government and financial sector have decided to extend the guarantee maturity for closed small business owners under the Regional Credit Guarantee Foundation. This is to ease repayment burdens and support re-startups in consideration of the COVID-19 situation.

On the 31st, the Ministry of SMEs and Startups held the first Small Business Financial Support Committee meeting of the year at the Korea Federation of SMEs in Yeouido, Seoul, attended by Minister Kwon Chil-seung, Kim Ki-moon, Chairman of the Korea Federation of SMEs, Kim Hak-do, Chairman of the Korea SMEs and Startups Agency, and heads of the five major commercial banks, where this decision was made.

As of the end of last year, among 1,328,000 businesses using credit guarantees from regional credit guarantee foundations, 132,000 are closed. Among these, 39,000 businesses have 560 billion KRW in maturities coming due starting next month.

In principle, guarantee maturity extensions are not allowed for closed businesses. They must repay immediately upon maturity, which risks losing the chance to restart if there are no available funds due to COVID-19.

Accordingly, the Ministry of SMEs and Startups stated, "The increase in closures of small business owners due to the prolonged COVID-19 pandemic is emerging as a social issue, and if guarantees are discontinued, a large number of credit delinquents may occur. Faithful payers should be allowed to maintain guarantees to provide opportunities for a fresh start."

Starting in July, a 'Bridge Guarantee' will be introduced to convert business guarantees of closed small business owners into personal guarantees, continuing guarantee support until re-startup.

The Ministry also said, "Financial institutions will strictly follow guidelines at frontline counters for loan maturity extensions and repayment deferrals, and will refrain from raising loan interest rates or reducing loan limits due to credit rating downgrades, considering the unavoidable sales decline caused by COVID-19."

At the Financial Support Committee meeting, cooperation on the 'Proactive Restructuring Program' to support the management normalization of liquidity-crisis SMEs and support plans for startups in materials, parts, and equipment were also discussed.

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