According to Pulse by Maeil Business News Korea,

The South Korean government will allocate up to 15 trillion won ($11.3 billion) to bolster the competitiveness of middle-market Korean companies and facilitate their transition to new industry sectors, the Financial Services Commission announced on Thursday.

A variety of funding measures were unveiled, including the establishment of a fund to support middle-market companies’ transition to new industries. The fund, initially seeded with 500 billion won, is slated to expand to 5 trillion won depending on its performance, with the country’s five major banks—KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NH Nonghyup Bank—expected to invest up to 2.5 trillion won.

The quintet will also participate in a low-interest loan program tailored for middle-market companies venturing into new industries. This program, funded with 1 trillion won from the banks alongside Korea Development Bank, offers a 1 percentage-point preferential rate for loans of up to 150 billion won per company to be used for equipment, research and development, and operational needs.

Middle-market companies, accounting for 1.3 percent of Korea’s total number of active companies, contributed 14.4 percent of total corporate in the country sales as of the end of 2023 but policy finance and support measures for these companies are viewed as somewhat lacking compared to those for smaller enterprises. The average borrowing rate for middle-market companies stood at 4.56 percent in 2022, higher than the 3.52 percent for small businesses.

Additional initiatives will also help middle-market companies secure operating funds via various channels. These include allocating 1.8 trillion won to support the issuance of collateralized bonds for advanced technology and strategic business purposes, as well as developing a ladder program to help SMEs grow into middle-market enterprises.

For middle-market companies and SMEs facing temporary management crises, the five major banks and the KDB will jointly provide a special interest rate reduction program of 5 trillion won. Companies facing temporary liquidity risks could qualify for exemption from surcharges for a year and apply for rates in the 3-percent range. Financial support of over 26 trillion won will also be available for companies in advanced industries such as semiconductors.

The latest government measures, aimed at providing tailored and customized financial support, will total 76 trillion won, including 20 trillion won from the five major banks.

By Chae Jong-won and Chang Iou-chung

Copyrights Pulse by Maeil Business News Korea. All Rights Reserved.

Source: Pulse by Maeil Business News Korea (February 16, 2024)