The Korea Federation of Small and Medium Enterprises signed interest subsidy support agreements with local governments including Goyang, Chuncheon, Wonju, Cheonan, and Pocheon, and said on the 12th it will implement interest subsidy loans for small and medium-sized enterprises and small merchants facing business difficulties.
The local government interest subsidy support loan is a program in which, when a company enrolled in the Mutual Aid Fund for Small and Medium Enterprises applies for a loan, the local government supports 1% to 3% per year of the loan interest. Last year, 3,100 companies used 254 billion won in local government interest subsidy support loans and received about 2.4 billion won in interest support.
The Mutual Aid Fund for Small and Medium Enterprises is a mutual aid program for small and medium-sized enterprises introduced in 1984 under the Small and Medium Enterprise Cooperatives Act. To prevent bankruptcies of small and medium-sized enterprises and small merchants and to stabilize management, it provides loans funded by mutual aid contributions paid by small and medium business owners.
Subscribers to the mutual aid fund can use unsecured loans (working capital loans) at an average 5.6% interest rate for up to three times their contribution balance, depending on their credit rating. If a local government provides interest subsidy support of up to 3%, the lending rate falls to as low as 2.6%.
Lee Chang-ho, head of the mutual aid business unit at the Korea Federation of Small and Medium Enterprises, said, "We plan to actively improve the system so we can provide practical financial support to small and medium-sized enterprises and small merchants suffering from prolonged sluggish domestic demand," and added, "We will also continue making recommendations to expand government and local government interest subsidy support."