Expansion of Business Transition Support Scope to Include Promising Items and New Business Entry in the Same Industry

Ministry of SMEs and Startups, Major Overhaul of the 'Small Business Conversion System'

Minister Kwon Chil-seung of the Ministry of SMEs and Startups. [Photo by Asia Economy DB]

[Asia Economy Reporter Kim Jong-hwa] The scope of business transformation support, which was previously limited to switching to different industries, will be expanded to include switching to promising items within the same industry, business model innovation, and entry into new businesses, actively supporting the recovery of small and medium-sized enterprises (SMEs) struggling with deteriorating management.

On the 22nd, the Ministry of SMEs and Startups announced the "SME New Business Entry and Recovery Promotion Plan" to support the recovery of SMEs facing difficulties due to rapid changes in the business environment caused by COVID-19 and deteriorating management.

The government has been striving to proactively respond to industrial structural changes and support recovery from deteriorating management for SMEs. This plan mainly focuses on institutional improvements to reduce the burden of failure, such as abolishing joint guarantees and cleaning up non-performing loans.

Until now, the scope of business transformation support was limited to switching to different industries, but going forward, support will be expanded to include switching to promising items within the same industry, business model innovation, and entry into new businesses. The support system will also be reorganized, including regulatory improvements linked with the SME Ombudsman.

Flexible Operation of Business Transformation Implementation Period from 3 to 5 Years

Additionally, the business transformation implementation period will be flexibly operated from the current 3 years to a maximum of 5 years, providing sufficient time for comprehensive reorganization of management activities.

To systematically support these institutional reforms, revisions to related regulations such as the "Special Act on Promotion of Business Transformation for SMEs" and operational guidelines (Ministry of SMEs and Startups notices) will be promoted within the year to promptly complete institutional improvements.

The support programs under the business transformation system will also be significantly strengthened. A new "Leading Enterprises for New Business Entry Program" will be established, selecting 20 promising companies for new business entry annually through a stepwise evaluation process involving public participation, and nurturing them as leading enterprises through package support including funding, technology development, investment, and manpower.

Until now, support for business transformation has focused mainly on funding for implementation, but support will be strengthened at each stage from preparation to implementation and follow-up.

To increase the success rate of business transformation for SMEs, support will be provided for establishing business transformation plans through experts at the preparation stage, and support during the implementation stage will be greatly expanded, including increased policy funds, technology development recommendations, market access, and newly established job transition training.

Furthermore, follow-up support such as funding and export assistance will be introduced for excellent business transformation companies, and to promote the trading of idle facilities resulting from business transformation, the existing "Asset Trading Brokerage Market" will be enhanced by adding mobile and rental services.

In addition, the "Proactive Structural Improvement Program," piloted last year, will be fully operated to provide proactive liquidity supply, debt adjustment, and structural improvement plan establishment to prevent companies from reaching the workout stage, expanding the scale from 15 companies last year to 50 companies this year.

For SMEs and representatives requiring business liquidation, legal support for rehabilitation and bankruptcy will be provided in cooperation with the Korea Legal Aid Corporation, along with related consulting services.

Reorganization into 'K-Doctor' System Incorporating Prevention and Treatment Concepts Beyond Funding Support

The SME policy fund diagnostic system will be reorganized into the "K-Doctor" system, which includes prevention and treatment concepts beyond mere funding support. In addition to the current face-to-face evaluation system, big data-based online continuous diagnostics and emergency/challenge diagnostics will be introduced to provide solutions.

To secure a minimum safety net after failure, subscription to the Yellow Umbrella Mutual Aid for entrepreneurs preparing for business closure will be encouraged, and a new guarantee program will be implemented for closed small business owners. The extension of tax benefits for recovering entrepreneurs and the expansion of seizure exemption scope for bankrupt representatives will also be reviewed with related ministries.

Specialized educational institutions will be operated regionally for failed entrepreneurs, and support will be provided for re-challenge funds (loans), intellectual property consulting (Korean Intellectual Property Office), and investment attraction linked with the Korea Venture Investment Corp to help successfully re-established companies grow stably. Alongside this, efforts will be made to improve awareness of failure and re-challenge by holding "Failure Expos" and "Re-challenge Days," and the establishment of a Failure Museum linking failure analysis and re-challenge support will also be pursued.

Minister Kwon Chil-seung of the Ministry of SMEs and Startups said, "Many SMEs have felt the need to respond to global environmental changes but have been hesitant to take action. Through this plan, we will promote active business structure transformation of SMEs and significantly strengthen rapid crisis response and re-leap support so that the COVID-19 crisis can be used as an opportunity to enhance competitiveness."

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