Financial Services Commission to announce final plan next week
‘Three years of loan, deferment of principal and interest’ for one year
Differentialization review according to the borrower rather than in bulk
The government has decided to extend the loan maturity extension and deferment of principal and interest payments for SMEs and small business owners, which are scheduled to end at the end of this month, in a practical way. However, it is known that they are considering differentiating measures such as extending the loan maturity and extending the grace of principal and interest payments depending on the borrower, rather than a lump-sum re-extension as in the past.
An official from the Financial Services Commission said on the 20th, “We are currently coordinating opinions with the financial sector,” and “We will reveal the final plan next week.” Some are talking about extending the maturity of the loan balance by three years, and extending the deferred payment of principal and interest by one more year. Depending on the situation of each borrower, it is highly likely that the borrower will be able to choose between the extension of the loan maturity or the Startup Fund, a debt adjustment program for the self-employed and small businesses that will be launched on the 4th of next month. Since the start-up fund is limited to the self-employed and small business owners, support measures for small and medium-sized enterprises are also being sought. In the meantime, the financial sector has argued that “the deferral of interest repayment should be excluded as it is necessary to filter out marginal companies even if it is extended”.
The measures to extend the maturity of loans to small businesses and to defer repayment of principal and interest were first implemented in April 2020 to support small business owners who are experiencing financial difficulties due to COVID-19, and have been extended four times so far. As of the end of January this year, the balance of loans to small businesses that received support for extension of maturity, deferment of repayment, and deferral of interest stood at 133.3 trillion won. Among them, 116.6 trillion won in maturity extension, 11.7 trillion won in deferment of principal repayment, and 5 trillion won in deferred interest payment. The support measures were about to end at the end of this month, but the need for re-extension emerged again as concerns about high interest rates and high inflation and economic recession grew. On the 15th, President Yoon Seok-yeol met with Kim Joo-hyeon, Chairman of the Financial Services Commission, and Lee Bok-hyeon, the head of the Financial Supervisory Service, and instructed that the financial authorities should actively consult with the financial sector so that the repayment burden on small business owners would not be increased. Both the ruling and opposition parties, including the Democratic Party, have urged the financial authorities to come up with countermeasures.
Reporter Song Soo-yeon