56% of SMEs Say "Chuseok Funding Difficult"... Average Shortfall of 47.6 Million Won

Survey Results on Chuseok Fund Demand for 900 Companies by Korea Federation of SMEs
Financial Institutions' 'High Interest Rates' Issues... Doubled Compared to Last Year

Due to the impact of COVID-19, 5 out of 10 small and medium-sized enterprises are experiencing financial difficulties for Chuseok funds. It was reported that 3 out of 10 companies are unable to decide on or provide bonuses. Photo by Asia Economy DB

[Asia Economy Reporter Kim Heeyoon] Due to the impact of COVID-19, it has been revealed that 5 out of 10 small and medium-sized enterprises (SMEs) are facing difficulties with their Chuseok funds. Three out of 10 companies were unable to decide on or pay bonuses.

On the 6th, the Korea Federation of SMEs (Chairman Kim Kimum) announced the results of the '2021 SME Chuseok Fund Demand Survey' conducted from August 12 to 26 on 900 SMEs, revealing these findings.

The survey showed that more than half (55.8%) of SMEs responded that they are having difficulties with Chuseok funds. The smaller the sales scale, the higher the proportion of responses indicating financial difficulties.

The causes of financial difficulties (multiple responses) were △poor sales and revenue (78.5%) △rising raw material prices (53.0%) △increased labor costs (25.7%) △delayed collection of sales proceeds (21.3%), and 96.4% responded that COVID-19 had an impact on their financial difficulties.

Conditions for raising funds through financial institutions were also confirmed to be still difficult. The response indicating 'difficult' was 36.9%, more than twice the 17.0% who responded 'smooth.'

The difficulties in dealing with financial institutions (multiple responses) were △loans based mainly on financial statements such as sales (34.2%) as the most common, followed by △high interest rates (29.0%), which nearly doubled compared to last year (15.6%).

Graphic on recent overall fund advance related to 900 small and medium-sized enterprises. Table = Korea Federation of SMEs

This Chuseok, SMEs responded that they need an average of 378 million KRW in funds (short-term operating funds such as wages and raw materials). The amount of funds not secured among the required funds was 47.6 million KRW, showing a shortage rate of 12.6% compared to the required funds.

Regarding plans to secure the insufficient Chuseok funds (multiple responses), 45.3% planned early collection of delivery payments, 40.4% planned payment deferrals, and 30.2% planned borrowing from financial institutions, but 16.4% responded that they had 'no measures.'

When asked about this year’s Chuseok bonus (cash) payment plans, 34.2% responded that they 'plan to pay,' the highest proportion. This was followed by 31.3% who said 'not paying due to annual salary system (included in annual salary, etc.),' 21.3% who 'have not yet decided,' and 13.1% who 'do not pay due to management difficulties.'

Companies that pay bonuses as a fixed rate responded that they would pay an average of 63.2% of the base salary, and those that pay a fixed amount responded that they would pay an average of 453,000 KRW. The average planned Chuseok holiday was 4.8 days.

Choo Moon-gap, Head of the Economic Policy Headquarters at the Korea Federation of SMEs, said, “Due to prolonged COVID-19, sales slumps, sharp rises in raw material prices, and increased labor costs have added to management difficulties, making it harder than ever for SMEs to raise funds. With recent interest rate hikes increasing financial burdens, special attention and measures from policy institutions and financial sectors to facilitate fund support ahead of Chuseok are necessary.”

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