Jeonnam Province Establishes Nation's First Win-Win Financial Model for Small Business Owners

Do-Financial Sector Collaboration... Promoting Management Stabilization for Small Business Owners

Jeonnam Province has established the nation's first win-win financial model for small business owners.

On the 28th, the province announced that it signed a special interest support business agreement for small business owners with eight financial institutions, including Jeonnam Credit Guarantee Foundation, NH Nonghyup, Gwangju, KB Kookmin, IBK Industrial Bank, Shinhan, Woori, Hana Bank, and the National Agricultural Cooperative Federation.

Through collaboration between the province and the financial sector, this model aims to reduce the interest burden on small business owners struggling with high-interest loans, thereby stabilizing their management. It is the nation's first pioneering win-win financial model for small business owners. In particular, interest support for medium- and low-credit small business owners is given preferential treatment compared to high-credit small business owners.

According to the agreement, the eight financial institutions and Jeonnam Credit Guarantee Foundation will operate a total of 150 billion KRW in special preferential loan products for small business owners, including ▲an additional interest rate reduction on 100 billion KRW of Jeonnam small business development funds and ▲the creation of 50 billion KRW in new low-interest safe conversion loans.

The eight financial institutions will differentiate the additional interest rate reduction loan product of 100 billion KRW by credit rating, limiting the additional interest rate to 2.0% for high-credit borrowers and 1.7% for medium- and low-credit borrowers.

In response, Jeonnam Credit Guarantee Foundation will support guarantees by expanding the guarantee ratio up to 100% for two years for medium- and low-credit small business owners and reducing the guarantee fee by 0.6 to 0.8 percentage points for the first year, among other preferential screening conditions.

Loans are limited to 200 million KRW per business, and Jeonnam Province will support interest payments of 3.0 to 3.5% annually for two years. Through this agreement, Jeonnam Province has enabled small business owners to access funds at a low interest rate of around 1 to 2%.

Additionally, 50 billion KRW in new low-interest safe conversion loans have been created to reduce the interest burden by providing 3.0% interest support to existing users of small business development funds maturing in 2023.

Previously, medium- and low-credit small business owners had to bear interest rates more than twice as high as those of high-credit borrowers due to their low credit ratings. However, through this agreement, they will receive a much higher interest reduction rate of 5 to 6% compared to high-credit borrowers, allowing them to use funds at lower interest rates.

For example, for a loan of 50 million KRW, there is an annual interest saving effect of about 2.5 to 3 million KRW per business, which is expected to greatly assist medium- and low-credit small business owners who face difficulties in using financial institutions in securing operating funds.

Governor Kim Young-rok said, “In February, Jeonnam Province realized win-win finance through the nation's first pioneering financial cooperation model called the Small and Medium Enterprise Support Special Fund.” He added, “This special fund support has expanded win-win finance to small business owners. We will continue to seek ways to alleviate the financial difficulties of medium- and low-credit small business owners, who are financially vulnerable, and to revitalize the local economy.”

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