Hwaseong City Provides 5.1 Billion Won Financial Support to Small Business Owners This Year... Largest Scale in Gyeonggi Province

Special Guarantees, Fees, and Interest Rate Differential Compensation
Mayor Jung: "Focusing on Policies to Stimulate Consumption and Revitalize the Livelihood Economy"

Hwaseong City in Gyeonggi Province will provide a total of 5.1 billion KRW in support funds this year to help small business owners struggling due to the economic downturn in Gyeonggi and the resulting consumption slump.

Hwaseong City announced on the 17th that this year, through the 'Small Business Owner Fund Support Project,' it will invest ▲3 billion KRW for special guarantee support for small business owners ▲300 million KRW for special guarantee fee support ▲1.8 billion KRW for interest rate differential compensation support.

The city explained that this reflects the recent 'Management Outlook Survey' announced by the Korea Federation of Small and Medium Business, in which small business owners identified expanded financial support such as refinancing loans and low-interest loans as the most urgent policy needs.

First, to support special guarantees for small business owners, the city will increase its contribution fund to 3 billion KRW, the largest scale in Gyeonggi Province. Special guarantee support allows small business owners to receive loans using a guarantee certificate issued by the Gyeonggi Credit Guarantee Foundation, funded by the city’s contribution, without separate collateral. Accordingly, the scale of special guarantees will increase to 30 billion KRW, which is ten times the contribution fund. Businesses can receive loans up to 50 million KRW for up to five years. The city will also support the guarantee fee incurred when applying for the special guarantee, but only for the first time.

Additionally, small business owners who receive special guarantee loans from 12 commercial banks that have signed agreements with the city will have 2% of their loan interest compensated for five years. For example, a small business owner with a 5% loan interest rate will only need to pay 3% interest after the city’s compensation. A city official explained, "Considering that other local governments compensate 1-2% for 1-2 years, this interest rate differential compensation is an unprecedented condition."

The city added that loan interest rate conditions related to the special guarantee support project will also improve starting this year. This is because, through an agreement with commercial banks at the end of last year, the maximum limit of additional interest rates for 2025 was capped to reduce the loan interest burden on small business owners.

Loan interest rates are calculated by adding the base interest rate and the additional interest rate. According to the agreement, commercial banks will lower the maximum additional interest rates for the first-tier financial institutions this year by an average of 0.38 percentage points for variable rates and 0.55 percentage points for fixed rates compared to last year. The second-tier financial institutions will also limit the total loan interest rate ceiling to 4.9%, which is expected to reduce the loan interest burden on small business owners.

Previously, in the fourth quarter of last year, the city adjusted the average loan interest rate to 5.18%, down 0.7 percentage points from 5.89% in the same period the previous year, significantly easing the loan interest burden on small business owners. Adding the city’s 2% interest support, the actual interest rate borne by small business owners averaged 3.18%, about 3% lower than commercial bank loan interest rates.

Jung Myung-geun, Mayor of Hwaseong City, said, "I hope this fund support will be a turning point to alleviate the difficulties faced by small business owners struggling due to worsening internal and external conditions," and added, "The city will continue to focus on discovering policies to stimulate local consumption and revitalize the livelihood economy."

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