If Small Business Owners Struggle to Repay Debt... "Get Support for Maturity Extension and Interest Rate Reduction"

IBK Industrial Bank Expands 'Self-Employed Change-Up' Program to Non-Face-to-Face Applications
Supports Extension of Lump-Sum Loan Maturities, Installment Payment Extensions for Installment Loans, and Loan Interest Rate Reductions

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[Asia Economy Reporter Park Sun-mi]Gong Jin-su (55, pseudonym), who operated a chicken restaurant after borrowing 50 million KRW in working capital, faced a huge hospital bill due to his spouse's sudden traffic accident just one month before the loan repayment deadline. Business was already difficult due to strengthened social distancing measures, making it hard to repay the loan principal, and this incident made the situation even worse. After consulting with an acquaintance, Mr. Gong applied for the self-employed support program and, as a result, received a one-year extension on the principal repayment deadline.

Choi Seok-jin (66, pseudonym), who runs a small mold factory, had to make a lump-sum repayment of 60 million KRW in facility capital loans this month. However, due to the bankruptcy of a client hit by COVID-19, accounts receivable could not be collected, and he was unable to pay employee salaries. Through the self-employed Change-up program, Mr. Choi obtained an opportunity to repay the loan principal in 12 installments of 5 million KRW per month over the next year and is currently still operating the factory.

Self-employed individuals facing difficulties in debt repayment have a path to relief even after the expiration of the maturity extension and interest payment deferral measures for the COVID-19 affected small and medium enterprises and small business special loans in March.

According to the banking sector on the 6th, IBK Industrial Bank recently expanded the application method for the ‘Self-employed Change-up’ program from face-to-face to non-face-to-face and has begun full-scale support for the self-employed. This program targets individual business owners struggling with debt repayment, reviewing the possibility of normalization and easing repayment burdens through maturity extensions and interest rate reductions. It was established with the intention of actively supporting self-employed individuals who had been excluded from financial support amid the worsening situation caused by the spread of COVID-19.

To receive support, applicants must meet conditions of total loan amount under 1 billion KRW, an average loan interest rate of 4% or higher, and must not be in arrears at the time of application. As of the end of last year, about 7,000 people were confirmed to fall within the scope of applicants for the Self-employed Change-up program. Banks propose appropriate support measures such as maturity extension for lump-sum repayment loans, installment extension for installment loans, conversion to long-term installment loans, and interest rate reductions, with support possible for 1 to 2 years depending on the review results.

Yoon Jong-won, president of IBK Industrial Bank, named support for small and medium enterprises and small business owners as a key task in this year’s New Year’s address, emphasizing efforts to reduce the financial burden on small business owners and SMEs. Therefore, support for individual business owners struggling with debt repayment is expected to expand further.

Commercial banks are also engaging in inclusive finance by operating customized programs amid the prolonged COVID-19 pandemic and increasing business closures. Shinhan Bank supports interest payment deferrals (up to 6 months) for SMEs through the disposal of collateral real estate and is currently reducing overdue interest (once per borrower, up to 5 million KRW) for individual business owners temporarily facing liquidity shortages and overdue payments. Woori Bank operates the Credit Loan 119 program and special pre-workout system for household loans, providing proactive debt restructuring such as new refinancing and principal repayment deferrals for borrowers with overdue or potential overdue risks.

Hana Bank applies a preferential interest rate separately for diligent payers within the Self-employed 119 program, which eases repayment burdens for small business owners and the self-employed. The diligent payer preferential interest rate offers a 0.5% reduction every six months for borrowers repaying without delay, supporting repayment burden relief for the self-employed with up to a 2.0% interest rate reduction (applied four times).

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