Korea Federation of SMEs Requests Financial Services Commission for Additional Loan Maturity Extension... "Crisis in Face-to-Face Industries"

Most Industries See Rising DSR, Raising Concerns Over Risk of Zombie Companies
"Ongoing COVID Crisis... Increased Management Burden Due to Interest Rate Hikes"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] The Korea Federation of SMEs announced on the 16th that it has submitted a proposal to the Financial Services Commission, expressing the need for an additional extension of loan maturities, which are scheduled to end at the end of March.

According to the proposal submitted by the Federation, since COVID-19, the number of self-employed individuals with employees has decreased, while the loan amounts for small and medium-sized enterprises (SMEs) have surged, exacerbating employment contraction and worsening business conditions.

The Federation stated, "The loan growth rate is rapidly increasing as income levels decrease," adding, "If the maturity extension measures end, the DSR (Debt Service Ratio) will rise in most industries, raising concerns that many marginal companies, especially in face-to-face sectors, may emerge."

In a 'SME Loan Maturity Extension Opinion Survey' conducted by the Federation last month, 87% of SMEs and small business owners expressed a desire for an additional extension, indicating a high necessity for extending loan maturities.

Accordingly, the Federation proposed extending the loan maturity extension and interest repayment deferral measures, as well as actively preparing financial policies for a smooth transition.

The financial measures proposed by the Federation include ▲expanding non-recourse accounts receivable factoring ▲low-interest refinancing loans ▲interest debt forgiveness for vulnerable borrowers ▲additional supply of policy finance.

Joo Moon-gap, Head of the Economic Policy Division at the Federation, emphasized, "It is an important role of the government to help sound companies not collapse due to external factors that are difficult for businesses to cope with, such as COVID-19."

He also stressed, "The COVID-19 crisis continues, and the recent average daily number of confirmed cases has increased more than tenfold compared to the third extension period in September last year," adding, "With the Bank of Korea's base rate having been raised three times in six months, business burdens are increasing, making additional maturity extension measures absolutely necessary."

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