9 out of 10 Small Business Owners Say "Loan Repayment is Difficult... Financial Support is Urgently Needed"

It was found that 9 out of 10 small business owners feel burdened by loan repayments due to the increase in the base interest rate.

The Korea Federation of Small and Medium Business conducted a financial status survey of 1,345 small business owners from the 8th to the 14th and announced the results on the 27th. Regarding the "current level of burden for loan repayments," 87.6% responded that it was at a "difficult level." It appears that the prolonged economic downturn has increased debt, and the rise in the base interest rate has significantly increased financial costs. 59.7% of respondents said their loan balances increased compared to last year. According to a Bank of Korea survey, self-employed debt reached 1,033 trillion won in the first quarter of this year.

Another burden is that sales and operating profits are not sufficient to cover the heavy financial costs. When asked about the average monthly sales in the first half of this year, 32.6% of small business owners responded "less than 5 million won," the highest proportion. "5 million to 10 million won" accounted for 19.4%. This means that more than half of self-employed individuals have annual sales of around 100 million won at best.

Small business owners are facing an increasingly severe situation due to worsening performance, increases in public utility charges such as electricity and gas, and rising labor costs due to minimum wage hikes. The lower the average monthly sales, the higher the proportion of those using high-interest third-tier financial institutions rather than government policy funds with low interest or first- and second-tier financial institutions. This is why there is a growing demand for urgent policies to support low-income small business owners.

The biggest difficulty related to loans was "increased interest burden due to interest rate hikes," accounting for 45.9%, ranking first. This was followed by "inability to obtain additional loans due to loan limit restrictions" (31.3%), "complex loan procedures and required documents" (8.8%), "maturity" (7.1%), and "repayment demands due to delinquency" (3.3%).

The most needed financial policy was "interest reduction through preferential interest rates for small business owners," chosen by 51.7% of respondents. "Implementation of long-term installment payments (10 to 20 years or more) for loan principal" also accounted for a significant 45.9%.

Cha Nam-su, Head of Policy and Public Relations at the Korea Federation of Small and Medium Business, said, "The total loan amount for small business owners exceeds 1,000 trillion won, but loans receiving government support for maturity extension and repayment deferral amount to only 85.3 trillion won, which is just 8.25% of total loans." He added, "To provide real help to small business owners, low-interest loans should be expanded, and financial support such as maturity extension and repayment deferral should be extended to cover all self-employed loans."

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