KDB seeks to offer more funds to innovative startups
By Lee Kyung-min
The state-run Korea Development Bank (KDB) has sought to funnel more money into innovative startups by reforming its credit screening and loan review system, it said Monday.
The long-term move to foster startups with great potential by offering stable funding seeks to revise previous methods whereby companies had a limited way of securing operational funds as they were judged only on performance-based criteria.
They include sales, net profit, firm credit scores, or whether they can provide enough collateral.
The previous method has long been criticized as it denied firms with short-term weak performance, thus cornering those firms or sometimes forcing them into bankruptcy.
Under the new system in full implementation since Aug. 10, a review committee under the state lender conducts a qualitative review over the management competence, marketability, growth potential and technology.
About five bank officials sit on the committee with up to two outside experts including officials from other state-run organizations.
KDB Chairman Lee Dong-gull / Yonhap
Eligible for the revised system include firms with little to no current profit, despite a sustainable, innovation-oriented business model.
Management competence will be judged based on market reputation on the firm's key decision-making members and investors.
Marketability will be determined based on growth potential as well as influence on consumers and key competitors in the industry.
Technology reviews will determine originality of the innovative qualities.
Firms' financial stability will be judged on cash reserves, cash burn rate and fund expenditure over the course of business operations.
“Under the previous method, firms whose performance had been in red for the past three or four years had no way of securing stable funding. We have changed the system to help cash-strapped firms with growth potential,” a KDB official said.
“Since the implementation about three months ago, four firms were granted support and seven companies are under review. We will continue to foster small startups with a long-term vision,” he added.
In a similar move, the KDB provided a total of 1.25 trillion won ($1 billion) for 127 innovative startups for the first nine months of 2018 through its KDB-CIB cooperation program, a new financing program designed to offer financial support according to their growth stage.
The amount was up 67 percent or 501.1 billion won from the same period of 2017.
Launched in 2017, the KDB-CIB program is a unique corporate financing scheme exclusively for small and medium-sized firms through lending and investment.