If You Manage Diligently, You Will Receive Exceptional Support When Re-Launching... Revitalizing SME Restart

Expansion of Funding Channels for Re-Startup
Strengthening Institutional Foundations for Re-Challenge Preparation

If you pass the diligent management in-depth evaluation when challenging re-startup, negative credit information such as bankruptcy, rehabilitation, and delinquency will be blinded, enabling fund procurement.

Lee Young, Minister of SMEs and Startups. Photo by Jo Yongjun jun21@

On the 19th, the Ministry of SMEs and Startups announced the "Measures to Activate Support for SME Reboot" containing these details at the 'Day of Rechallenge' event held at the S-Plex Center in Mapo-gu, Seoul. This is the re-startup policy direction of the Yoon Seok-yeol administration prepared in collaboration with the Regulatory Innovation Promotion Team of the Office for Government Policy Coordination.

First, the diligent management evaluation system will be strengthened to promote practical re-startup. The diligent management evaluation is a procedure to verify whether the business was managed sincerely without window dressing accounting or intentional default before re-startup. It is used to select government support targets such as re-startup funds. The in-depth evaluation is a system that preferentially evaluates technology and business feasibility for those who pass the diligent management evaluation.

Through this measure, the diligent management review committee will expand the number of reviewers in technology and management fields, including startup experts, and strengthen the weight of technology and business feasibility evaluation from the existing 50% to 70%. Excellent re-startup companies that pass the improved diligent management in-depth evaluation will have their negative credit information such as past bankruptcy, rehabilitation, and delinquency records blinded. This means that information inquiries through credit information companies will be blocked.

Also, previously, re-startup in the same industry was recognized as a startup only if more than three years had passed since the closure date, but from now on, if a new business model or new technology is adopted and the diligent management in-depth evaluation is passed, it will be recognized as a startup. This will also enable entry into the government's overall startup support projects.

The channels for re-startup fund procurement will be expanded. Until now, policy financial institutions have written off claims against SMEs with low recovery prospects as special claims and managed them as such, and if there was no practical benefit in debt collection, they sold special claims to the Korea Asset Management Corporation. However, even after the sale, failed entrepreneurs sometimes faced difficulties and economic hardships due to debt collection, making recovery difficult.

Accordingly, the three policy financial institutions?the Small and Medium Business Corporation, the Korea Technology Finance Corporation, and the Korea Credit Guarantee Fund?have prepared a method to convert existing special claims into equity investment if the re-startup is done as a corporation and the entrepreneur wishes. In this case, the re-startup entrepreneur's debt is converted into investment, freeing them from the burden of debt repayment.

The scale of re-startup fund support will be expanded from 75 billion KRW to 100 billion KRW, and the grace period will be extended by one year.

Along with this, the institutional foundation for preparing for re-challenge will be strengthened. The minimum living expenses exempt from seizure have been revised to a fixed rate so that they automatically link to inflation. Applying 40% of the monthly median income of 5.4 million KRW for a family of four this year, the seizure-exempt property increases to 12.96 million KRW. Previously, it was fixed at 11.1 million KRW since 2019.

Although there was no legal basis to support the closure process, in the future, startup companies that have closed or are about to close will be actively supported through the "Small and Medium Enterprise Startup Support Act."

Lee Young, Minister of SMEs and Startups, said, "Through this measure, we expect the activation of challenging re-startups by excellent talents and the creation of many successful cases of recovery," and added, "We will ensure that this measure is well implemented to create a virtuous startup ecosystem where re-startup after failure is easy."

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