Rapid Increase in Debt Collection Among Small Business Owners... Domino Effect of Closures Feared

Number of Companies Unable to Settle Payments on the Rise
Recovery Now Virtually Impossible

Kim (54), who supplies ingredients in Seoul, has been losing sleep for months due to unpaid payments from clients such as restaurants. Although he desperately wants to receive the payments, he keeps hearing that business is slow and to please wait a little longer. Kim said, "I was worried that I might have to close my business if this continued, so I eventually requested debt collection from a credit information company."

Recently, as the economic downturn deepens, inquiries about debt collection for small business commercial claims have surged. There are concerns that this could trigger a 'domino effect' of business closures.

According to credit information company A on the 4th, the number of commercial debt collection requests has increased by 20-30% compared to the same period last year since the end of last year. This is because more small business owners experiencing poor sales have requested collection for unpaid goods and construction payments. Commercial claims refer to debts arising from commercial transactions such as goods trading. Park Sang-hoon, head of the sales center at the credit information company, explained, "The number of debt collection inquiries is higher than during the COVID-19 pandemic."

In fact, many companies are on the verge of closure due to worsening business conditions. According to a recent survey by the Korea Economic Association of 500 self-employed individuals, 72.0% and 72.6% reported decreased sales and net profits respectively last year. Jang (41), who runs a local mart, said, "As the average spending per customer decreases and purchase prices rise due to high inflation, there are times when I cannot meet receivables and fail to pay suppliers on time for over a week."

Commercial debt collection essentially means that recovery is nearly impossible. An industry insider said, "If a debtor does not pay for years but repays even partially and sincerely, they do not request debt collection. Requesting collection means the small business owner has reached a level where they cannot repay the money." Debt collector Jung (38) said, "Recently, I visited a restaurant run by a debtor, but it was deserted. I met an elderly debtor couple living there. The debtor also suffers from chronic illness, so they have no capacity to repay anymore."

Professor Choi Cheol of Consumer Economics at Sookmyung Women’s University said, "Government loans and financial support can help small business owners overcome major crises, which is meaningful. However, the fact that debt collection has been requested likely indicates chronic accumulated deficits," adding, "This should be seen as a shadow of sluggish domestic demand."

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