400 Billion KRW Scale 'SME Accounts Receivable Factoring' Supply

Acquisition of SME-held Accounts Receivable Before Maturity Date Through Kibo

[Asia Economy Reporter Kim Cheol-hyun] The Ministry of SMEs and Startups (Minister Lee Young, hereinafter referred to as the Ministry) announced on the 1st that it will provide a total of 40 billion KRW worth of 'SME Accounts Receivable Factoring' this year to new technology businesses with excellent technology and business potential.

Loans secured by existing accounts receivable from banks (accounts receivable secured loans) have a repayment obligation, so in the event of a buyer company's bankruptcy, the bank demands repayment from the selling SME, posing a risk of a chain bankruptcy. Although there is an accounts receivable insurance system to prepare for buyer company bankruptcy, it is structured to provide benefits only when payment is not collected by the due date, so it does not help the selling SME's cash flow at the time sales occur.

Accordingly, the Ministry decided to supply non-recourse factoring finance without repayment claims through the Korea Technology Finance Corporation (Chairman Kim Jong-ho, hereinafter Kibo) starting from the 2nd, to support selling SMEs in securing funds at the time sales occur without worrying about buyer company bankruptcy. The support targets are new technology businesses with high technological and future growth potential that have acquired accounts receivable through the supply of goods or services and have transaction records with the buyer company at least twice in the past six months.

Factoring Procedure

The target receivables are electronic tax invoice issued amounts of 10 million KRW or more, with maturity within 90 days, arising from business transactions in the course of the company's own business activities, not for the purpose of fund circulation. The support limit per company is up to half of the sales amount, with a maximum of 3 billion KRW each for both the selling SME and the buyer company.

When Kibo acquires accounts receivable, it applies a discount rate ranging from 2.5% to 6.5% annually, and for a 90-day accounts receivable application, the actual discount rate borne by the selling SME is about 0.82%. Detailed product information such as factoring support criteria, target support, and application procedures can be found on the Korea Technology Finance Corporation website or the Corporate Madang platform. The program may close early if the budget is exhausted.

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