[SME Loan Concerns]② Increase in At-Risk Companies in Electronics and Auto Sectors... Loan Restrictions Applied

Increase in At-Risk Companies in Pharmaceuticals, Electronics, Manufacturing, and Information Services
Poor Performance Leads to Bank Loan Restrictions

Now, marginal companies are no longer limited to the food or travel industries. Marginal companies, defined as "companies that have been unable to pay interest with their earnings for three consecutive years," are increasing not only in growth sectors such as electronics and information technology but also in mature industries including automotive and retail.

According to the report titled "Increasing Marginal Companies, Need to Focus on Characteristics by Type" released on the 12th by Hana Financial Research Institute, the proportion of marginal companies among all firms rose from 11.3% at the end of 2019 to 14.4% at the end of last year. During the same period, marginal companies increased in both large enterprises (9.8%→12.3%) and small and medium-sized enterprises (SMEs) (11.6%→14.9%), with SMEs experiencing a particularly greater impact.

The operating profit margin of marginal SMEs fell to -14.1% in 2020, when COVID-19 was at its peak, and has not escaped the negative slump since then (-15.2% in 2021, -13.7% in 2022).

Researcher Kim Mun-tae analyzed, "However, the debt dependency of marginal SMEs did not increase after the pandemic," adding, "They originally had a debt dependency exceeding 50%, and poor performance limited their ability to obtain loans." This means that the financial condition of SMEs deteriorated so much that they were unable to secure new loans from banks. This can be interpreted as one of the reasons why SME loan interest rates recently could decrease to levels comparable to those of large enterprises.

Industries that previously showed favorable business conditions have also undergone changes. As competition intensified, weaker companies experienced deteriorating performance and fell into marginal company status. This trend is clearly seen when comparing the proportion of marginal companies at the end of 2019 and the end of 2022. Notably, the pharmaceutical industry (19.4%→23.5%), electronic product manufacturing (9.6%→13.1%), and information service industries (9.2%→14.2%) showed significant increases.

Industries that had entered maturity and maintained stable performance, such as apparel manufacturing (6.2%→9.8%) and automotive manufacturing (12.4%→15.2%), are no longer safe zones. The polarization caused by mid-to-low priced online products and luxury brand growth was a major factor in apparel manufacturing. In automotive manufacturing, the rise of electric vehicles led to a decline in internal combustion engine vehicles, which was cited as a reason for the downturn.

Researcher Kim advised, "Profitability is expected to worsen further due to upcoming loan maturities and the impact of high inflation," and recommended, "This is a critical time when the risk of marginal companies increases, so existing loan management should be handled through debt restructuring and corporate restructuring."

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