Worsening Funding Conditions for SMEs... 67% Cite "High-Interest Burden"

SME Central Association Funding Demand Survey
"Will pay bonuses" 44.3%
"Need to prepare financial support policies"

Korea Federation of SMEs '2023 SME Lunar New Year Fund Demand Survey' Results

[Asia Economy Reporter Kim Bo-kyung] Four out of ten small and medium-sized enterprises (SMEs) reported that their financial conditions worsened compared to last year's Lunar New Year. High loan interest rates were identified as the biggest challenge when securing funds from banks.

The Korea Federation of SMEs announced the results of the '2023 SME Lunar New Year Fund Demand Survey' conducted from December 27 last year to January 5 this year, targeting 800 SMEs, on the 11th.

Responses indicating that financial conditions were 'difficult' compared to last Lunar New Year accounted for 36.6%, slightly higher than those who said 'no different from last year' (34.9%). Compared to last year's Lunar New Year fund demand survey, where 26% responded 'difficult,' this suggests a deterioration in financial conditions.

The causes of financial difficulties (multiple responses allowed) were reported in the following order: △poor sales and revenue (70.3%) △rising prices of raw and subsidiary materials (66.9%) △increased labor costs (34.5%) △frozen or reduced delivery payment unit prices (7.2%).

Regarding financial difficulties, 75.1% responded that COVID-19 had an impact. The response rate indicating COVID-19 affected financial conditions was relatively higher among companies with sales under 1 billion KRW (85.5%) and among exporters (84.8%) by sales type.

The biggest challenge when securing funds from banks (multiple responses allowed) was high interest rates (66.9%), nearly doubling compared to last year (33.5%).

Regarding requests for support related to financial use, 'interest rate reduction' was the highest at 67.2%, followed by 'easing of real estate collateral loan conditions (7.8%)' and 'excessive document submission (6.3%).'

SMEs need an average of 225.5 million KRW in funds this Lunar New Year but are short by an average of 25.8 million KRW.

Regarding plans to secure the lacking funds among the required Lunar New Year funds (multiple responses allowed), respondents said they plan to △collect delivery payments early (65.0%) △borrow from financial institutions (29.0%) △defer payments (27.5%), but 14.5% responded that they have 'no measures.'

44.3% of SMEs said they will pay Lunar New Year bonuses (in cash) this year, while 17.0% remain undecided.

For fixed-amount payments, the average per person is 400,000 KRW, a decrease of 47,000 KRW compared to last year's Lunar New Year (447,000 KRW), and for fixed-rate payments, respondents said they would pay 61.7% of the base salary.

Choo Moon-gap, head of the Economic Policy Headquarters at the Korea Federation of SMEs, stated, "Continuous base rate hikes have made financial costs the biggest challenge in securing funds," and added, "There is a need to prepare financial support policies to alleviate the burden of financing costs."

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