By Yoon Ja-young
Staff Reporter

The government has asked conglomerates to pay their suppliers in cash as part of measures to help small- and medium-sized firms suffering from liquidity trouble.

The Ministry of Knowledge Economy said Thursday that it would officially ask businesses to refrain from paying suppliers with post-dated bills, which are converted to cash after three or six months.

It plans to hold a meeting jointly with the Federation of Korean Industries, the chaebol mouthpiece, in which executives of the country's top 30 conglomerates will participate.

However, it is doubtful whether it will help as payment with post-dated bills has been a chronic problem for small suppliers each time the economy turns bad.

According to the Korea Federation of Small and Medium Business, around 45 percent of small companies' sales in the fourth quarter last year were paid for with such bills, the highest ratio ever since 2002 when it started compiling such data. The ratio stood at a mere 36 percent in the first quarter of last year.

Statistics show that conglomerates were not better clients for small suppliers. They were making 46 percent of payments with post-dated bills, higher than the average.

It took 119.7 days on average for small suppliers to get cash for the bills, adding to their liquidity crunch, with banks cutting loans to small businesses despite the government's request to expand them.

Banks are likely to be more careful in extending corporate loans. According to the central bank's survey of senior loan staff at local banks, the credit risk index for small- and medium-sized businesses recorded 59 in the first quarter, the highest level since a decade ago when the bank started compiling data, meaning loan officers will be more careful in extending credit.

Small suppliers to Ssangyong Motor are in the worst-case scenario. They hold over 350 billion won in bills from the troubled auto manufacturer. Some of them can't even afford to pay workers' salaries since Ssangyong's filing for court receivership.

The number of small businesses going bankrupt is soaring. According to the Korea Financial Telecommunications & Clearings Institute, the number of firms that went bankrupt was 1,133 in October last year, double the 578 of two months earlier.

chizpizza@koreatimes.co.kr