[Changes in the Second Half of 2022] Up to 90% Debt Reduction for Small Business Owners... Establishment of a 30 Trillion Won Bad Bank

Introduction of the 'Small Business Owners and Self-Employed Debt Adjustment Program'

[Asia Economy Sejong=Reporter Kwon Haeyoung] Starting from October, a 'Small Business Owner and Self-Employed Debt Adjustment Program' will be introduced to reduce credit debt by up to 90% for small business owners and self-employed individuals struggling to repay loans due to COVID-19 damages.

The government published "Changes Starting from the Second Half of 2022," summarizing the institutional and regulatory changes effective from the second half of this year, on the 30th.

The government will establish a 'Small Business Owner and Self-Employed Fresh Start Fund (tentative name)' with a scale of up to 30 trillion KRW to purchase loan claims and support repayment schedule adjustments and debt reductions.

The support targets borrowers who are individual business owners or corporate small business owners affected by COVID-19, who have been delinquent on principal and interest repayments for more than 90 days, causing or likely to cause loan defaults. Benefits include grace periods, conversion to long-term installment loans, and interest rate reductions to allow repayment of principal and interest over an extended period. In particular, credit debts held by defaulting borrowers will also be supported with principal reductions ranging from 60% to 90%, according to their repayment capacity.

Eligible borrowers can apply for debt adjustment from October this year for the next three years.

Additionally, to restore normal business operations and enhance competitiveness for self-employed and small business owners, a special guarantee program worth 3.25 trillion KRW will be implemented from the second half of the year. It will provide working capital and facility funds within a tentative limit of 100 million KRW per company, applying preferential conditions such as guarantee fee deductions and relaxed screening requirements.

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