Financial Authorities Provide Special Loans and Guarantee Support Worth 21 Trillion Won to SMEs Ahead of Chuseok

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[Asia Economy Reporter Song Hwajeong] Policy financial institutions will support small and medium-sized enterprises (SMEs) and mid-sized companies with a total of 21 trillion KRW in special loans and guarantees to help overcome COVID-19.

On the 5th, the Financial Services Commission announced these measures as part of financial usage policies during the Chuseok holiday to support the public.

First, financial support during the Chuseok holiday period to overcome COVID-19 will be strengthened. Policy financial institutions such as Industrial Bank of Korea, Korea Development Bank, and Korea Credit Guarantee Fund will proactively provide special loans and guarantees totaling 21 trillion KRW. This amount is 1.7 trillion KRW higher than the previous year.

Industrial Bank of Korea will provide new working capital support up to 300 million KRW per SME (total new funds supplied: 3.5 trillion KRW) for raw material payments, employee salaries, and bonuses. For settlement-type loans, interest rate reductions of up to 0.3 percentage points will be offered.

Korea Development Bank will supply 2.1 trillion KRW in new working capital through branch consultations and screenings, offering interest rate reductions of up to 0.4 percentage points.

Korea Credit Guarantee Fund will provide guarantees totaling 7.8 trillion KRW (1.8 trillion KRW new + 6 trillion KRW extensions) to SMEs and mid-sized companies in anticipation of increased funding needs before and after Chuseok. Using the COVID-19 damage support guarantee system, screening procedures will be simplified, and preferential treatment will be given for guarantee fees and guarantee ratios. According to the COVID-19 economic recovery special guarantee, the guarantee fee is reduced by 0.5 percentage points, and the guarantee ratio is 90%.

Card companies will promptly pay card settlement amounts incurred during the Chuseok holiday to 400,000 small merchants (annual sales between 500 million and 3 billion KRW) without separate applications.

To enhance consumer convenience during the Chuseok holiday, if loan maturity dates, credit card payment dates, or automatic utility bill payment dates fall during the holiday, they will be automatically extended to the 13th after the holiday. If loan maturities from banks, insurance companies, savings banks, or card companies fall during the Chuseok holiday, the maturity will be automatically extended to the 13th without overdue interest. If early repayment is desired, it can be done on the 8th without early repayment fees after consulting with the financial institution. However, some financial products may not allow early repayment, so prior confirmation is necessary.

If credit card payments are due during the Chuseok holiday, they will be automatically withdrawn from the customer's account on the 13th without late fees.

If housing pension or deposit payment dates fall during the Chuseok holiday, payments can be received early on the 8th before the holiday. The Korea Housing Finance Corporation will pay all customers whose housing pension payment dates fall during the Chuseok holiday on the 8th in advance. Deposits maturing at financial institutions during the Chuseok holiday can be withdrawn on the 13th, including interest accrued during the holiday, and depending on the product, customers may request early withdrawal on the 8th.

If there is a payment date for sales proceeds during the Chuseok holiday, payment will be postponed to after the holiday (13th-14th). For example, if stocks are sold on the 7th, the payment date will be postponed from the original 9th to the 13th. For bonds (general bonds, repurchase agreement bonds (Repo)), gold, and emission permits sold on the 8th before the Chuseok holiday, where the settlement deadline is the same day as the trade date, payment can be received on the same day.

Mobile and flexible branches will operate for urgent financial transactions. Four mobile branches (deposit/withdrawal, new bill exchange, etc.) will be operated at highway rest areas, and 12 flexible branches (currency exchange, remittance, etc.) will be operated at airports and areas with high concentrations of foreign workers.

The financial authorities will strengthen security and internal control systems to prevent financial accidents. To prepare for incidents such as DDoS attacks, ransomware distribution, and ATM hacking during the Chuseok holiday, a rapid response system will be maintained among the financial authorities, Financial Security Institute (Integrated Security Control Center), and financial companies. Financial companies will thoroughly review contingency plans for system failures to prevent financial accidents in advance.

Additionally, the Financial Services Commission urged that for large sums of money needed during the Chuseok holiday for real estate contracts (sale balance transactions, jeonse deposits, etc.) or inter-company payments, funds should be withdrawn in advance or transfer limits increased via internet banking to allow transfers. It also emphasized that foreign currency remittances and international payments may not be processed normally, so prior confirmation with the transaction bank or adjustment of transaction dates is necessary.

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