Introduction
The financial challenges faced by small and medium enterprises (SMEs) due to settlement delays have prompted the South Korean government to take significant steps to mitigate the impact. The Financial Services Commission (FSC) and the Ministry of SMEs and Startups (MSS) are leading the charge, working closely with various financial institutions to provide necessary support. This article explores the measures being implemented to support affected businesses and ensure their financial stability.
Financial Support Measures
1. Extension of Loan Maturities and Repayment Postponement
The FSC and MSS have requested all financial institutions, including policy finance organizations like the Korea Development Bank (KDB) and the Industrial Bank of Korea (IBK), to extend the maturities of existing loans and defer repayments for companies affected by settlement delays. The financial sector and policy finance institutions have committed to supporting these firms by extending loan maturities for up to one year, akin to the support provided for businesses impacted by fires or floods.
Major banks such as Kookmin Bank, Shinhan Bank, and SC First Bank, which offer pre-settlement loans, have also agreed to cooperate in extending the maturities of existing loans to prevent defaults and maintain the credit ratings of the affected sellers【33†source】.
2. New Guarantee-backed Loan Program
To address liquidity issues caused by settlement delays, the FSC will introduce a guarantee-backed loan program through the Korea Credit Guarantee Fund and IBK. This program, amounting to “3 trillion KRW + α,” aims to provide emergency funds to SMEs at low interest rates. The goal is to help SMEs facing temporary liquidity crises to secure new financing at favorable terms. The FSC and IBK are working on developing specific products and plan to launch the emergency funding program shortly【33†source】.
3. Emergency Management Stabilization Fund
The MSS is leveraging the emergency management stabilization fund programs of the Korea SMEs and Startups Agency and the Small Enterprise and Market Service to support affected small businesses and SMEs. A total of 2 trillion KRW in policy funds (loans) will be made available to assist these businesses. Details regarding the support procedures and other specifics will be announced separately in August.
In addition, the Ministry of Culture, Sports, and Tourism will operate a loan interest subsidy program (2.5-3.0%p) worth 600 billion KRW to support travel agencies and other tourism businesses affected by the delays【33†source】.
Comprehensive Support System
1. Formation of an Emergency Response Team
The FSC, MSS, the Financial Supervisory Service (FSS), and related financial institutions have formed an emergency response team. This team will oversee the assessment of the impact of the settlement delays on businesses and coordinate financial support measures. By closely monitoring the situation, the team aims to ensure timely and effective support for the affected companies.
2. Ensuring Business Continuity
These measures are designed to prevent businesses from facing financial collapse due to liquidity issues. By extending loan maturities and providing emergency funding, the government aims to stabilize affected businesses and maintain their operations. This approach not only helps individual companies but also supports the broader economy by preserving jobs and sustaining economic activity.
Importance of Government Intervention
The intervention by the FSC and MSS highlights the crucial role of government support in maintaining economic stability during crises. By providing financial relief and ensuring liquidity, these measures help businesses navigate challenging times, reduce the risk of defaults, and maintain credit ratings. This, in turn, fosters a more resilient business environment where companies can recover and thrive.
Conclusion
The South Korean government’s proactive measures to support SMEs and small businesses facing settlement delays are a testament to its commitment to economic stability and business continuity. Through loan extensions, emergency funding programs, and the formation of an emergency response team, the FSC and MSS are providing vital support to ensure that affected businesses can weather the storm and emerge stronger. As these measures are implemented, they will play a crucial role in maintaining the health and resilience of the Korean economy.
For further details and updates on the support programs, stay tuned to announcements from the FSC and MSS, and consult financial advisors to navigate these challenging times effectively.
Focus Keyphrase
- Support for SMEs amid settlement delays
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