The Ministry of Small and Medium Enterprises and Startups has initiated measures to strengthen safety nets for small business owners who have diligently repaid their loans. The main points are providing up to 7 years of partitioning repayment and a 1 percentage point reduction in interest.
Minister Han Seong-suk noted on the 30th at the Small Business Support Center in Jongno-gu, Seoul, during a continuous meeting aimed at 'supporting the recovery and strengthening the safety nets for small business owners', that 'the key to overcoming the crisis facing our economy is the recovery and stabilization of small business owners, who are at the heart of people's livelihoods.' She added, 'I want to hear the vivid voices from the field through this meeting and resolve any issues that can be improved as soon as possible.'
Minister Han is set to hold a total of 10 meetings focused on financial safety nets, crisis safety nets, and business closure and re-establishment safety nets. The 2nd and 3rd meetings will take place next month in the 1st to 2nd week, focusing on crisis safety nets and business closure and re-establishment safety nets.
During the meeting, the Ministry of Small and Medium Enterprises and Startups announced the 'diligent repayment incentive plan.' This plan supports about 190,000 small business owners who are diligently repaying policy funds through direct loans and guaranteed loans, offering a partitioning repayment period of up to 7 years and a 1 percentage point reduction in interest. The repayment burden for small business owners is expected to decrease from about 940,000 won per month to a maximum of 340,000 won.
Small business owners eligible for support can apply for the incentive through the small business policy fund website starting today. Applications are also accepted at 78 small business support centers nationwide or regional credit guarantee foundation offices.
The Ministry of Small and Medium Enterprises and Startups plans to implement a partitioning repayment guarantee support program in August, which will support business closure small business owners with existing regional credit guarantee foundation guaranteed loans for up to 15 years of partitioning repayment and low-interest loans. Previously, the bridge guarantee for business closures allowed for partitioning repayment of up to 7 years, but with this guarantee, the repayment period will be extended to 15 years.
In addition, if diligent repayment small business owners apply for additional policy funding, the interest rate will be preferentially reduced by up to 0.3 percentage points compared to before. The number of loan opportunities limited to '3 times within 5 years' will also be increased to '4 times within 5 years.' Additionally, funding opportunities of up to 200 million won, such as for innovation growth promotion funds, will be provided.
A program will also be developed to support recovery and re-establishment for diligent repayment small business owners if there is a concern about arrears after receiving the benefits of partitioning repayment and interest reduction. The selection of support candidates will be based on sales performance and other criteria.
If selected for support, expert consulting will be provided for marketing, business model improvement, and more. If it is determined that continuing the business is difficult, consulting necessary for business closure or industry transition, such as tax and labor, will be supported along with costs for store demolition and employment or re-establishment training.
The usage of the 'burden reduction credit' system will also be expanded. The burden reduction credit is a system that provides points worth up to 500,000 won for paying utility bills and four major insurance premiums to approximately 3.11 million small business owners with annual sales of 300 million won or less. The Ministry of Small and Medium Enterprises and Startups plans to expand it to include communication fees and vehicle fuel costs, which also have a public service nature, in addition to the existing utility bills and four major insurance premiums.
Small business owners and related institutions attending the meeting voiced the need to lower existing loan interest rates to ease the burden. Song Chi-young, president of the Korea Federation of Micro Enterprise, stated, 'They lent us at an interest rate in the 2% range during COVID-19,' adding, 'Reducing interest is not about debt relief; it is about giving small business owners a chance to re-establish themselves.'
Yoon Hyung-jun, CEO of Cheonwon365, mentioned, 'While the interest rates are lower than market rates, if we set an upper limit on variable rates, we hope it will ease the burden in this difficult situation.'
Park Seong-hyo, chairman of the Small Business Development Corporation, replied, 'The benchmark interest rate for the funds we procure is 2.68%, so it is difficult to lower it further.'
Minister Han stated, 'It is not only the government that presents policies; merchants and small business owners must also exchange (opinions) with each other for a smoother process.' She continued, 'This meeting starts with knowing each person's situation,' adding, 'We will internally review the comments made today and reflect on those that can be incorporated into policies.'