SME Industry Concerns Over Loan Interest Rate Hikes: "Please Refrain from Sudden Sharp Increases"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] Small and medium-sized enterprises (SMEs) cited interest rate hikes and loan repayment demands as major difficulties when raising funds from banks.

If the Bank of Korea raises the base interest rate within the year as announced, loan interest rates are expected to follow suit, increasing financial concerns for SMEs.

According to a survey conducted by the Korea Federation of SMEs from the 14th to the 23rd of last month involving 500 SMEs, the most common difficulty experienced when raising funds from banks in the first half of the year (multiple responses allowed) was the increase in loan interest rates at 24.2%.

This was followed by partial loan repayment demands (12.6%), high fee burdens (12.4%), and rejection of new loans (8.0%).

Regarding the outlook for loan interest rates in the second half of the year, 30.0% responded that rates would rise, while only 4.6% expected a decline. 65.4% anticipated rates to remain similar to the first half.

Expectations for bank loan limits showed that those forecasting a reduction (16.6%) were more than twice those expecting an increase (7.2%). 76.2% expected limits to remain similar to the first half.

As for financial support needed in the second half (multiple responses allowed), the most cited was restraint on sharp loan interest rate hikes (50.8%). This was followed by expansion of policy fund loans through government supplementary budgets (50.2%) and support for extended loan maturities with installment repayments (40.2%).

Regarding current financial conditions, 27.6% responded that conditions were poor, 47.4% said average, and only 25.0% said favorable.

Among companies reporting poor financial conditions, the reasons (multiple responses allowed) included decreased sales (81.2%), rising raw material prices (51.4%), and labor cost burdens (38.4%).

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