[Q&A] Customized Financial Support for Small Businesses Worth 41.2 Trillion Won to Start from the 25th

[Asia Economy Reporter Song Hwajeong] The government will provide customized policy funds totaling 41.2 trillion KRW over two years to supply liquidity, strengthen competitiveness, and support recovery for self-employed individuals and small business owners. The 41.2 trillion KRW in tailored funding includes ▲10.5 trillion KRW for liquidity supply ▲29.7 trillion KRW for competitiveness enhancement ▲1 trillion KRW for recovery support, among others.

On the 24th, the Financial Services Commission summarized the details of the customized financial support for self-employed individuals and small business owners in a Q&A format.

What is the background for promoting the 80 trillion KRW scale financial support plan for self-employed individuals and small business owners?

During the COVID-19 period, face-to-face consumption contraction and business restrictions severely worsened the business conditions of self-employed individuals and small business owners. According to a survey on the impact on small business owners, 70.8% reported a decrease in sales due to COVID-19. In the crisis response process, loans from financial institutions to self-employed individuals and small business owners increased significantly, and the structural quality of loans also deteriorated. The outstanding KRW loans for individual business owners increased from 692.7 trillion KRW at the end of 2019 to 809.7 trillion KRW at the end of 2020, and 916 trillion KRW at the end of last year. The growth rate of non-bank loans among individual business owner loans was 46%, nearly double the 26% growth rate of bank loans.

So far, the government has implemented various financial and resource supports as emergency measures, and to normalize COVID-19 measures and promote the daily recovery of self-employed individuals and small business owners, it has decided to promote a fundamental and customized financial support package worth 80 trillion KRW. This includes ▲41.2 trillion KRW in funds tailored to liquidity and competitiveness demand ▲8.5 trillion KRW in low-interest refinancing to reduce high-interest burdens ▲and the introduction of a 30 trillion KRW New Start Fund to support repayment difficulties.

What are the sources of the 41.2 trillion KRW scale customized fund support?

Most of the 41.2 trillion KRW customized financial support program (38 trillion KRW) will be supplied using the own resources of policy financial institutions (Industrial Bank of Korea, Korea Credit Guarantee Fund).

However, to supply 3.25 trillion KRW in special guarantees from the Korea Credit Guarantee Fund for self-employed individuals and small business owners who have suffered long-term difficulties due to COVID-19 damage, some resources will be procured (220 billion KRW) through the supplementary budget in May.

What is the scale of fund supply by each institution for the 41.2 trillion KRW customized fund support?

Customized financial support for self-employed individuals and small business owners will be promoted through the Industrial Bank of Korea (loans) and the Korea Credit Guarantee Fund (guarantees). Of the total new fund supply of 41.2 trillion KRW over two years, the Industrial Bank of Korea will supply 26 trillion KRW, and the Korea Credit Guarantee Fund will supply 15.2 trillion KRW.

Does the 41.2 trillion KRW (20.6 trillion KRW annually) scale customized financial support represent an expansion of support for self-employed individuals and small business owners compared to the past?

Funding support for self-employed individuals and small business owners through the Industrial Bank of Korea and the Korea Credit Guarantee Fund was about 18 trillion KRW annually before COVID-19, but expanded to about 28 trillion KRW annually due to emergency funding support for those affected by COVID-19.

With the recent end of social distancing and progress in daily recovery, funds to increase liquidity and competitiveness necessary for business operations for self-employed individuals will be supplied at about 21 trillion KRW annually, which is higher than before COVID-19.

Looking at the annual average trend of fund supply for small business owners by the Korea Credit Guarantee Fund and the Industrial Bank of Korea, it was 17.7 trillion KRW annually from 2017 to 2019, 27.7 trillion KRW annually in 2020-2021, and 20.6 trillion KRW annually for this customized financial support. Compared to the past, the annual average supply scale of customized financial support increased by 16% compared to 2017-2019 but decreased by 26% compared to 2020-2021.

When will the customized financial support be implemented?

Most customized financial support programs, including COVID-19 special guarantees, will be implemented on the 25th.

However, the Hope Loan Plus reform for high-credit borrowers requiring short-term system development, additional interest rate reductions for descending loans, and non-face-to-face guarantees will be implemented on the 8th of next month.

Guarantees for platform tenant businesses are under consultation with related agencies, aiming for implementation in December after establishing alternative screening models.

How can consultations and applications be made?

Detailed consultations and fund applications for the 41.2 trillion KRW customized financial support can be made at the Industrial Bank of Korea and the Korea Credit Guarantee Fund. Applications can be made via their websites, smartphone apps, nationwide branches, or call centers, either by phone or in person.

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