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SMEs borrowing soars in April due to virus
People fill out application forms needed to seek loans at a branch of Small Enterprise and Market Service in Jongno-gu, central Seoul, April 9. / Korea Times file
By Lee Kyung-min
By Lee Kyung-min
The amount of loans taken out by small- medium-sized enterprises (SMEs) reported the steepest increase in five years in April, following a government-backed, low-interest borrowing offered as part of an economic relief package set up to limit fallout of the COVID-19 pandemic, data showed Friday.
The program offers loans up to 30 million won ($24,500) per person with an annual interest rate of 1.5 percent, mostly to small merchants. Eighty percent of the difference between the market rate and the offered rate will be shouldered by the government.
According to Korea's top five commercial banks ― Shinhan, KB Kookmin, Woori, Hana and NongHyup ― loans made out to SMEs stood at 463.9 trillion won in April, up 8.4 trillion won from a month earlier. This is the highest jump since September 2015.
Of the 8.4 trillion won increase, over 5.1 trillion won was in loans to small merchants.
Loans made out by the five banks combined stood at 1,187.5 trillion won in April, up 16.5 trillion won from a month earlier.
“The government measure to support small businesses led to a spike in loan demand last month, which commercial lenders are willing to meet given the difference is paid by the government,” a KB Kookmin official said.
Other than SMEs, borrowings taken out by large firms also soared for the second consecutive month in April, increasing by over 5.8 trillion won from a month earlier.
The month-on-month increase of 8.9 trillion won in March was the highest since September 2019.
Meanwhile, the top five lenders began to offer relief loans to small merchants hit by the virus pandemic following criticism that many loan seekers in desperate need to borrow money quickly were repeatedly having their applications denied or delayed due to administrative inefficiency, mostly a personnel shortage that remained roughly the same as before the virus spread.
Initially, requests for loans were accepted only at branches of Small Enterprise and Market Service (SEMS), a quasi-government organization supervised by the Ministry of SMEs and Startups.
Owners of SMEs had to wait for hours to apply for the particular type of loan, granted only if they are able to substantiate the extent and degree of how earnings of their businesses have dropped under the “adverse” circumstances.
The required documents included tax returns, business registration certifications, state-run health insurance premium payment receipts and records showing year-on-year decreases in sales figures for certain months.
Criticism soared because even a single minor mistake on paper pushed the applicant to the back of the queue, making them wait for hours again or return another day.