Analysis of US Biden Administration Policies: "We Also Need to Reduce Debt Burden for SMEs"

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[Asia Economy Reporter Kim Cheol-hyun] A study has found that it is necessary to reduce the debt burden on small and medium-sized enterprises (SMEs) to overcome the COVID-19 crisis. On the 16th, Nominsun, head of the Future Strategy Research Group at the Korea Institute of Startup & Entrepreneurship Development (President Oh Dong-yoon), suggested in the report titled 'U.S. Biden Administration's SME Support Policies in Response to COVID-19' that the implementation period for loan maturity extensions and principal and interest repayment deferrals should be extended for six months from September 30 this year to March 31, 2022.

This is because the possibility of economic slowdown for SMEs is increasing due to the resurgence of COVID-19. In fact, the SME outlook index fell by 5.3 points from 78.9 last month to 73.6 this month, and the small business outlook index dropped by 26.5 points from 71.9 in July to 45.4 this month. The U.S. is implementing policies that exempt principal, interest, and fees for companies that have received loans from the Small Business Administration to respond to the COVID-19 crisis. For loans approved since February this year, principal, interest, and fees for three months are waived up to a monthly limit of $9,000.

Nominsun emphasized the need to consider establishing a 'repayment waiver loan program' that exempts debt repayment up to a certain amount when SMEs achieve specific policy goals such as job creation and increased research and development (R&D) investment. He also suggested the need to raise employment retention subsidies for businesses subject to gathering bans and operational restrictions. This is because the social distancing level in the metropolitan area and some non-metropolitan regions has been raised to level 4, which is expected to increase the number of affected small business owners.

The U.S. is implementing an employment retention payroll tax credit system that allows employers to use payroll taxes and income tax withholding amounts that they would otherwise have to pay to the federal government as tax credits. The per-person credit limit has been significantly increased this year from $5,000 annually to $28,000 annually.

Senior Researcher Lee Jeong-hwan of the Korea Institute of Startup & Entrepreneurship Development, who participated in the preparation of this report, cited the American Jobs Plan currently under discussion in the U.S. Congress and stated that it is necessary to strengthen the weakened capacity of SMEs due to COVID-19. Lee suggested that to achieve this, it is necessary to promote open innovation using domestic and international resources and to enhance SMEs' problem-solving abilities to improve productivity and respond to changes in the technological environment.

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