8 out of 10 SMEs Say "Loan Maturity and Interest Payment Deferral Should Be Extended"

42.7% of SMEs Say "Loan Maturity and Interest Repayment Should Be Deferred Simultaneously"
"To Stop Loans, Additional Borrowing Is Needed... Urgent Need to Restrain Interest Rate Hikes"

A small and medium-sized manufacturing factory located in Gimpo, Gyeonggi.
Photo by Lee Junhyung

[Asia Economy Reporter Junhyung Lee] Eight out of ten small and medium-sized enterprises (SMEs) (78.5%) expressed a desire for an additional extension of the loan maturity and interest repayment deferral measures.

The Korea Federation of SMEs announced on the 26th that it conducted a survey titled 'SMEs' Opinions on Loan Maturity Extension and Interest Repayment Deferral' targeting 330 SMEs from the 13th to the 19th of this month, and the results showed this trend.

Four out of ten SMEs (42.7%) responded that both loan maturity and interest repayment should be deferred simultaneously. Regarding the necessary period for the additional extension, 79.1% answered that it should be extended until the end of September next year. This was followed by 'until the end of June next year (13.9%)' and 'until the end of March next year (4.9%)' in order.

The main reason for the need for an additional extension was cited by 76.4% as 'sales decline due to the resurgence of COVID-19.' This was followed by 'lack of financial capacity to repay loans and pay interest (56.8%)' and 'concerns over loan interest rate hikes in the second half of the year (40.2%).' 87% of the responding companies anticipated that if the loan maturity extension and interest repayment deferral end at the end of September this year and interest rate hikes overlap, the difficulties faced by companies will intensify.

65.5% of SMEs pointed out that if the additional extension ends, they will need to secure funds through additional loans to repay existing loans. Other anticipated problems upon the end of the additional extension included 'workforce reductions due to liquidity issues (18.8%)' and 'concerns over credit delinquency due to lack of repayment ability (15.7%).'

Jumun Gap, Head of the Economic Policy Division at the Korea Federation of SMEs, stated, "The loan maturity extension measures implemented three times since last year have greatly helped overcome the liquidity crisis caused by the prolonged COVID-19 pandemic," adding, "Only 2.1% responded that interest repayment deferral was necessary, confirming the SMEs' sincere intention to repay interest." He further said, "As the fourth wave of COVID-19 is worsening difficulties for SMEs and small business owners again, financial authorities should implement an additional extension of loan maturity and interest repayment deferral," and added, "It is also a critical time to refrain from rapid interest rate hikes."

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