Ministry of SMEs and Startups, Debt Relief for Debtors Facing Repayment Difficulties

Joint Debt Relief Campaign by Ministry of SMEs and Startups' Policy Financial Institutions: Jungjingong, Kibo, and Regional Credit Guarantee Foundation

A legal advisor for business recovery support visiting small business sites in person to provide consultations. [Photo by Small Enterprise and Market Service]

[Asia Economy Reporter Kim Jong-hwa] The Ministry of SMEs and Startups will reduce up to 90-100% of principal and interest for debtors struggling to repay debts due to business failure. This is to reduce repayment burdens and help them quickly return to economic activities.

The Ministry announced on the 24th that it will conduct a re-start support campaign jointly with the Small and Medium Business Corporation, Korea Technology Finance Corporation, and Regional Credit Guarantee Foundations until the 30th of next month.

This is a follow-up measure to the "Measures to Promote New Business Entry and Re-start of SMEs" announced in July, and it is the first time that the three policy financial institutions are conducting a joint campaign. Since 2018, the Small and Medium Business Corporation, Korea Technology Finance Corporation, and Regional Credit Guarantee Foundations have reduced about 42,000 cases and 570 billion KRW of debt through debt reduction programs over the past three years.

This campaign aims to alleviate repayment burdens and support the swift return to economic activities by reducing principal and interest for debtors facing difficulties in debt repayment due to business failure. As this campaign is conducted jointly by policy financial institutions, it is expected that more debtors will benefit from the debt reduction.

The campaign targets debtors of written-off debts (debts considered difficult to recover due to business closure, etc.) held by each institution, and individual contact will be made to eligible debtors during the campaign period. Eligibility can be confirmed by inquiring with each institution (regional offices, websites, etc.).

Each institution will evaluate the debtor's repayment capacity and reduce up to 90-100% of principal and interest. During the campaign period, Korea Technology Finance Corporation will also increase the reduction rate (from the existing 40-90% to 45-90%) to provide additional support. Since the support targets, contents, and periods differ by institution, detailed information can be obtained by contacting each institution.

Kim Hee-cheon, Director of SME Policy at the Ministry of SMEs and Startups, said, "We expect that the warm financial practices of policy financial institutions will enable small business owners dreaming of a restart to quickly recover their credit," adding, "The government will also strive to make failure experiences a foundation for re-challenge through institutional support such as abolishing joint guarantees and reforming the sincere management evaluation system."

Since 2018, the government has completely abolished joint guarantees for new loans and guarantees by policy financial institutions and is gradually abolishing joint guarantees for existing loans and guarantees by 2022. The sincere management evaluation, essential for government re-start support projects, is being reformed from an evaluation focused on legal violations to a comprehensive review of sincere management, and preferential measures for participation in re-start support projects are being prepared to strengthen re-start support.

An official from the Ministry of SMEs and Startups said, "Following this campaign, a joint policy financial institutions’ non-performing loan settlement event will be held on 'Re-challenge Day' (November 25)," adding, "By sequentially removing obstacles to re-start through debt reduction and non-performing loan settlement, an environment will be created where businesses can rise again even after failure."

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