Compensation for Losses of 550,000 Small Businesses and Small Merchants... 2.5 Million KRW in Q4 This Year and 2.5 Million KRW in Q1 Next Year, Totaling 5 Million KRW

On the 21st, as social distancing measures were further strengthened due to the rapid increase in COVID-19 cases, a rental notice was posted on a store located in Daehak-ro, Jongno-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Seo So-jeong] The government is establishing a loss compensation advance payment financial program for small business owners who are expected to suffer increased damage due to the extension of social distancing measures. This program provides a certain amount in advance as a loan before losses occur, and later deducts the loan amount from the confirmed loss compensation.

On the 31st, Kwon Chil-seung, Minister of SMEs and Startups, stated at the regular briefing of the Central Disaster and Safety Countermeasures Headquarters for COVID-19, "With the extension of strengthened distancing measures for two weeks, we expect the difficulties faced by small business owners to increase," adding, "We have prepared additional measures to quickly and broadly support losses caused by quarantine measures."

The initial applicants are 550,000 small enterprises and small business owners, specifically those among approximately 700,000 rapid compensation recipients in the third quarter of this year who were subject to business hour restrictions in December. The advance payment amount is 5 million KRW per business. For the fourth quarter of this year, when losses are already occurring, and the first quarter of next year, when losses are expected, 2.5 million KRW will be paid for each period. The required funds will be sourced from the 3.2 trillion KRW allocated for next year's loss compensation.

The loan for the advance payment will be provided promptly upon verification of eligibility without separate credit rating screening, and the loan will be repaid with the subsequently calculated loss compensation. Interest-free terms apply to loans repaid with compensation funds.

For any remaining loan balance exceeding the compensation amount, a super-low interest rate of 1% will be applied, with a maximum repayment period of five years, minimizing the burden on small business owners.

The government plans to concentrate all efforts to ensure that most small enterprises and small business owners who apply for the advance payment receive support before the Lunar New Year holiday begins.

For businesses newly eligible for loss compensation due to amendments in enforcement ordinances, preparations are underway to allow applications for first-quarter compensation advance payments in February next year. The previously announced strengthening of fourth-quarter loss compensation will also proceed without delay.

First, the scope of compensation will be expanded beyond businesses subject to closure and business hour restrictions to include those complying with facility capacity restrictions (▲1 person per 4m2 ▲50% of capacity ▲less than 100 people, etc.).

The government plans to change the legal basis for facility capacity restrictions and swiftly complete amendments to the Enforcement Decree of the Small and Medium Enterprise Act by January next year to expand the scope starting from the fourth quarter loss compensation.

Additionally, the quarterly minimum compensation amount will be increased from 100,000 KRW to 500,000 KRW to support micro small business owners. Customized support programs for small business owners, such as quarantine support funds, will also be promptly executed within the first quarter of next year.

The quarantine support fund, which provides 1 million KRW each to 3.2 million small enterprises and small business owners, has supported 650,000 businesses, accounting for 93% of the first payment target of 700,000 businesses, just four days after payments began on the 27th.

Starting January 6 next year, the second payment will begin for 2.2 million general small enterprises and small business owners, with support for approximately 2.9 million businesses expected to be completed by mid-January.

The government plans to rapidly proceed with applications and public offerings from early January to disburse more than 30 trillion KRW in the first quarter of next year, including quarantine support funds, quarantine supplies support funds, low-interest loans, local love gift certificates, and sector-specific customized sales recovery and burden reduction support.

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