Small Business Policy Funds Principal Repayment of 4 Trillion Won in 2025... Three Times the Level Before COVID-19

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The principal amount of policy fund loans that small business owners must repay by 2025 is predicted to exceed 4 trillion won. This is three times the level before the COVID-19 pandemic. The repayment burden on small business owners and SMEs is expected to increase steadily.

According to data on 'Policy Fund Principal Repayment and Scheduled Repayment Amounts' received by Yang Geum-hee, a member of the National Assembly's Industry, Trade, and Energy Venture Business Committee from the Small Enterprise and Market Service, the scheduled principal repayment amount for small business policy fund loans in 2025 is estimated at 4.0257 trillion won. This estimate is based on the principal repayment schedule.

The scheduled principal repayment amount in 2025 is 2.9 times the actual principal repayment amount of 1.4 trillion won in 2019, before the COVID-19 pandemic. This figure increased from 1.4 trillion won in 2019 to 1.9962 trillion won in 2020, 2.0612 trillion won in 2021, and surged to 3.6918 trillion won last year.

This year, the amount decreased to 2.6843 trillion won but is expected to rise again to 3.3105 trillion won next year and exceed 4 trillion won in 2025. This year's figure combines the cumulative results of the third quarter and the forecast for the fourth quarter, while figures from next year onward are projections.

The decrease in this year's repayment amount is partly due to many small emergency loans being repaid early and an increase in small business closures. When a business closes, the loan is recorded as a non-performing loan and excluded from the principal repayment figures.

The situation is similar for SME policy funds. The principal repayment amount for SME policy fund loans increased from 3.0883 trillion won last year to 3.433 trillion won this year, is expected to rise to 3.9697 trillion won next year, and reach 4.3579 trillion won in 2025.

There would be no problem if the sales and operating profits of small businesses and SMEs increase, but the economic outlook is not very bright. In particular, the prolonged high interest rates and high inflation, along with increases in electricity and gas bills and labor costs, and the rise in international oil prices due to the war between Israel and Hamas, are increasing the burden on small businesses and SMEs. In fact, a financial survey conducted by the Korea Federation of Small and Medium Business from September 8 to 14 with 1,345 small business owners found that 87.6% of respondents said they are struggling with the current loan repayment burden.

Representative Yang said, "I am concerned that the aftershock of the COVID-19 bill may lead to a wave of bankruptcies and closures among SMEs and small business owners," adding, "Proactive crisis management by the government is urgently needed to maintain the soundness of the domestic economy."

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