Will Bonuses Be Paid? 1 in 4 SMEs Say "Difficult Financial Situation for Lunar New Year Funds"

A small and medium-sized manufacturing company located in Gimpo, Gyeonggi.
Photo by Lee Jun-hyung

[Asia Economy Reporter Junhyung Lee] One in four small and medium-sized enterprises (SMEs) (26%) reported worsened financial conditions ahead of this year's Lunar New Year holiday.

The Korea Federation of SMEs announced on the 18th that a survey on '2022 SME Lunar New Year Fund Demand' conducted from the 6th to the 12th of this month targeting 800 SMEs revealed these results. 26% of SMEs responded that their financial situation for the Lunar New Year was 'difficult.' Meanwhile, 20.4% of companies answered that their financial conditions were 'smooth.' However, considering that 38.5% of companies reported financial difficulties during last year's Lunar New Year, the Federation explained that the financial situation of SMEs has slightly improved this year.

By scale, companies with lower sales and fewer employees experienced more financial difficulties. In particular, nearly half (48.7%) of companies with sales under 1 billion KRW reported financial difficulties. Among companies with fewer than 10 employees, 4 out of 10 (38.1%) responded that their financial situation was difficult. Additionally, domestic companies (27.9%) were found to have worse financial conditions than export companies (14.7%).

The main reason cited for poor financial conditions was 'poor sales and revenue' (68.3%). This was followed by 'rising raw material and component prices' (56.3%), 'increased labor costs' (31.3%), and 'delayed collection of sales proceeds' (10.6%). 85.6% of SMEs answered that COVID-19 had an impact on the deterioration of their financial conditions.

Status of Funding Conditions for Small and Medium Enterprises.
[Photo by Korea Federation of SMEs]

The average funds needed by SMEs for this Lunar New Year were surveyed at 271.5 million KRW, an increase of 56.6 million KRW compared to last year's 214.9 million KRW.

One in five SMEs (21.1%) responded that they have no measures to secure the insufficient Lunar New Year funds. This is more than double last year's 10.4%. Plans to secure the lacking funds included 'early collection of payment for deliveries' (50.3%), 'borrowing from financial institutions' (30.2%), and 'payment deferral' (21.1%).

Only 37.6% of SMEs decided to pay Lunar New Year bonuses. 20% of SMEs have not yet finalized their plans to pay the bonuses. The average bonus that SME employees will receive this Lunar New Year is 447,000 KRW, down 35,000 KRW from last year's 482,000 KRW.

Choomoon Gap, head of the Economic Policy Department at the Korea Federation of SMEs, said, “While the financial conditions of large companies improved last year, small companies seem to be struggling with financing difficulties due to the prolonged COVID-19 pandemic.” He added, “Especially for small-scale domestic companies, financial difficulties are more severe, so policy institutions and financial sectors need to pay attention and provide support to ensure that SMEs and small business owners can smoothly secure funds for the Lunar New Year.”

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