City signs MOU with regional lenders for low-interest small business loans

Interest rate subsidy of 4.0 percentage points in first year, 2.0 points thereafter

Busan city officials and representatives of major regional financial institutions sign an MOU for low-interest loans and high-interest debt refinancing for small businesses in financial distress, at Busan City Hall on Tuesday. [Busan city government]
Busan city officials and representatives of major regional financial institutions sign an MOU for low-interest loans and high-interest debt refinancing for small businesses in financial distress, at Busan City Hall on Tuesday. [Busan city government]

Busan city government signed an MOU with major regional financial institutions Tuesday afternoon at City Hall for low-interest loans and high-interest debt refinancing aimed at small businesses in financial distress.

The agreement is part of an emergency livelihood stabilization package designed to ease the financial burden on local small business owners struggling with what has been dubbed the "triple high" environment — high interest rates, high prices and a high exchange rate — compounded by a prolonged slump in domestic consumption.

The signing ceremony was attended by Mayor Jeon Jae-soo, Busan Bank President Kim Sung-ju, Hana Bank Deputy President Lee Jae-heon, KB Kookmin Bank Deputy President Yun Yong-hwan, Shinhan Bank Deputy President Yang Gun-gil, Woori Bank General Manager Im Dae-jin, and Busan Credit Guarantee Foundation Acting Director Jang Mi-im.

The city will pursue a project called "Minseong 112," providing 1.2 trillion won ($892 million) in financing at interest rates in the 1 percent range — the largest single-product policy loan program in the city's history.

Minseong 112 is structured as a five-part financial support package aimed at reducing the interest burden on small businesses, modernizing accommodation facilities, and building a growth foundation for entrepreneurial small business owners.

A "livelihood security guarantee" program will supply new low-interest working capital, while a "conversion guarantee" and a high-interest debt refinancing scheme will ease the burden on borrowers currently paying high rates.

An "aging accommodation facility modernization fund" will provide capital for upgrading outdated lodging establishments to boost stay-based tourism in Busan, while an "entrepreneurial small business" track will offer interest rate subsidies to innovative, growth-oriented small businesses.

The package totals 1.2 trillion won, comprising 500 billion won under the livelihood security guarantee, 200 billion won for the conversion guarantee, 300 billion won for high-interest debt refinancing, 100 billion won for aging accommodation facility modernization, and 100 billion won for the entrepreneurial small business track. More than 40,000 small business owners in the city are expected to benefit.

To meaningfully reduce the actual interest burden on small businesses, the city will provide an interest rate subsidy of 4.0 percentage points for the first year and 2.0 percentage points thereafter, bringing the effective borrowing rate down to the 1 percent range.

The city expects the policy financing to generate more than 1.5 trillion won in production-inducing effects and create employment opportunities for some 16,000 people in the Busan area, with funds flowing directly into neighborhood commercial districts and small business operations to reinvigorate the local economy.

Applications open Thursday, while the high-interest debt refinancing and aging accommodation facility modernization programs are set to launch Sept. 28 — after the chuseok holiday — to prevent a rush of loan applications before the holiday.

"I hope the Minseong 112 financial support will serve as a solid stepping stone that eases the burden on small business owners and leads them toward business recovery and a new leap forward," Mayor Jeon said.


kaf2002@heraldcorp.com