A Ray of 'Light' for Small Business Owners Struggling to Repay Debt... Banks Support Easing Repayment Burden (Comprehensive)

IBK Industrial Bank Expands 'Self-Employed Change-Up' Program to Non-Face-to-Face Applications

IBK Industrial Bank of Korea Self-Employed Change-Up Program

[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 a sudden traffic accident involving his spouse 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 an acquaintance, Mr. Gong applied for the self-employed support program and was granted 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 the opportunity to repay the loan principal in 12 monthly installments of 5 million KRW over the next year and is still operating his factory.

Self-employed individuals facing difficulties in debt repayment have a path to relief even after the expiration of maturity extensions and interest payment deferrals for 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 of Korea 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 self-employed individuals. This program reviews the possibility of normalization for individual business owners struggling with debt repayment and alleviates 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 qualify for support, the total loan amount must be less than 1 billion KRW, the average loan interest rate must be 4% or higher, and the applicant must not be in arrears at the time of application. As of the end of last year, about 7,000 people were confirmed to be eligible to apply for the Self-Employed Change-up program. Banks offer tailored support measures such as maturity extensions for lump-sum repayment loans, installment extensions for installment repayment loans, conversion to long-term installment loans, and interest rate reductions. Support can be provided for 1 to 2 years depending on the review results.

Yoon Jong-won, president of IBK Industrial Bank, emphasized in this year’s New Year’s address that supporting small and medium enterprises and small business owners is a key task and stated, "We will strive to reduce the financial burden on small business owners and SMEs," indicating that 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 the Household Loan Pre-Workout Special System, which provide proactive debt restructuring such as new refinancing and principal repayment deferrals for borrowers with overdue payments or at risk of overdue payments. Kookmin Bank also offers support such as maturity extensions (repayment deferrals), conversion to long-term installment repayment for livelihood-type self-employed borrowers, and extension of installment loan periods for borrowers with credit ratings of 7 to 8 or lower.

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 self-employed individuals. The preferential interest rate for diligent payers is reduced by 0.5% every six months for borrowers who repay without delay, supporting the reduction of repayment burdens for self-employed individuals by up to 2.0% (applied four times).

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