Seoul City Supports 50% of Trade Credit Insurance Premiums for 2,500 SMEs to Prevent Chain Bankruptcies

Accounts Receivable Insurance → Compensation up to 80% of Accounts Receivable Generated within 1 Year in Case of Client Default, Closure, or Bankruptcy
"Even if Only One Company Subscribes, It Stabilizes Management for Clients as Well"

[Asia Economy Reporter Lim Cheol-young] To support companies facing the risk of chain bankruptcy due to non-payment for delivered products or the bankruptcy of their business partners amid COVID-19 and the Ukraine crisis, Seoul City is taking active measures.

On the 2nd, Seoul City announced that it signed the "Seoul Metropolitan Government Accounts Receivable Insurance Premium Support Agreement" with the Korea Credit Guarantee Fund to support a stable management environment for small and medium-sized enterprises (SMEs), and from today, it will begin accepting applications for accounts receivable insurance premium support for SMEs.

The accounts receivable insurance premium support for SMEs aims to prevent chain bankruptcies of SMEs struggling due to non-payment of receivables after delivering goods by supporting 50% of the accounts receivable insurance premium. Utilizing a supplementary budget of 2 billion KRW, Seoul plans to assist 2,500 companies in subscribing to accounts receivable insurance. Accounts receivable insurance is a public insurance system where the Korea Credit Guarantee Fund compensates part of the losses incurred when an SME (the insured) sells goods or services on credit to a business partner (purchasing company) and fails to collect the receivables.

SMEs subscribed to accounts receivable insurance can receive compensation of up to 80% for accounts receivable generated during the one-year insurance period if events such as the business partner's check default, closure or dissolution registration, or initiation of rehabilitation or bankruptcy procedures occur. Notably, when one company subscribed to 'accounts receivable insurance' transacts with another company, the other company can also share the management stability benefits, thereby significantly preventing chain bankruptcies.

Through this agreement, the Korea Credit Guarantee Fund will offer a 10% discount on the insurance premium rate for SMEs subscribing to accounts receivable insurance, and Seoul City will support 50% of the premium up to a maximum of 2 million KRW per company. Any SME with annual sales under 20 billion KRW and whose headquarters or main business site is located in Seoul can apply.

Applications for insurance subscription will be accepted from today at four credit insurance centers within Seoul. SMEs wishing to subscribe can apply via phone consultation or by visiting a credit insurance center, submitting required documents such as a copy of the business registration certificate, financial statements, and tax invoice summary as guided. The subscription process includes ▲submission of required documents ▲confirmation of eligibility and negotiation of insurance amount and premium ▲credit investigation and determination of insurance amount ▲payment of premium and issuance of insurance policy.

Park Dae-woo, Director of Economic and Job Planning at Seoul City, said, "We plan to support SMEs in subscribing to accounts receivable insurance to preemptively block the risk of chain bankruptcies caused by unexpected changes in the business environment such as the prolonged COVID-19 pandemic and the Ukraine crisis," adding, "We hope many SMEs will apply to establish a foundation for safe management."

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