FSC expands policy finance support for small businesses, startups to W12tr

FSC holds policy finance support council

'Small Business Dream Package' raised from 10.5 to 12 trillion won

Startups to receive up to 200 million won in guarantees, with 3-year principal deferral

Joint guarantee requirement for SME P-CBO fully abolished

The Financial Services Commission office at Government Complex Seoul in Jongno-gu, Seoul. [Yonhap]

The Financial Services Commission is overhauling its policy finance framework to lower barriers and ease debt burdens for small business owners, early-stage startups and small and medium-sized enterprises. The FSC plans to expand financial support for small businesses to more than 12 trillion won ($8.67 billion), introduce a new program offering guarantees of up to 200 million won for early-stage startups, and fully abolish joint guarantee requirements for SME primary collateralized bond obligations.

The FSC held its 14th Policy Finance Support Council meeting Monday at Industrial Bank of Korea, chaired by Vice Chairman Kwon Dae-young, to discuss the measures.

On the small business front, the FSC will expand and restructure the "Small Business Dream Package," a program introduced last year. Its scale will grow from 10.5 trillion won to 12 trillion won. Launched in September last year, the program offers preferential interest rates and higher loan limits to small business owners who have consistently repaid their financial obligations without default. Eight products covering situations such as startup, growth and business difficulties are currently in operation, and 5.7 trillion won had been disbursed through August this year.

The FSC said it decided to broaden the program's scope amid continued hardship in the everyday economy and neighborhood commercial districts, where high interest rates and elevated prices risk adding to the burden on small business owners. The support scale will be expanded to more than 12 trillion won, with detailed revisions to be announced by the end of this month.

Support for startups will also be strengthened with a focus on the earliest stage. The Korea Credit Guarantee Fund and Industrial Bank of Korea signed a memorandum of understanding Monday to establish a "growth ladder" for early-stage innovative startups and launch a startup build-up program. Under the initiative, early-stage startups with strong technology and growth potential but limited sales records and transaction histories will be eligible for relaxed guarantee requirements and initial support of up to 100 million won. After one year, their creditworthiness and growth prospects will be reassessed, with the guarantee ceiling raised to up to 200 million won and principal repayment deferred for a further three years.

The FSC will also reform the system to reduce the debt burden on SMEs. Although public institutions abolished joint guarantee requirements for SMEs in 2018, the practice had been retained for P-CBO programs run by the Korea Credit Guarantee Fund and Korea Technology Finance Corporation. The FSC will fully abolish joint guarantees for P-CBOs as part of this overhaul, estimating the change will exempt roughly 1.9 trillion won in joint guarantee obligations annually based on 2025 figures.

The FSC also plans to build a long-term investment foundation for national strategic technologies. Korea Development Bank and Korea Growth Investment will anchor a new entity — Korea Strategic Technology Partners, or KSTP — that will bring in private financial firms to channel funds into future-oriented foundational technologies and core technologies in key industries.

KSTP aims to supply 1 trillion to 2 trillion won per year over five years, targeting a cumulative total of up to 10 trillion won. The FSC plans to complete the entity's incorporation and licensing by year-end, with its first projects to launch next year.

"Policy finance institutions have consistently supported the ambitions of startups, yet many entrepreneurs in the field still say raising startup capital is difficult," Vice Chairman Kwon said. "When early-stage startups face the first hurdle of a funding shortage, we need to trust in their potential and lower that initial financial barrier — laying a stepping stone so they can take on the challenge." He added: "Let us prepare thoroughly together so that the tasks discussed today — strengthening startup funding support, boosting investment in national strategic technologies, and expanding financial support for small businesses — are carried out as intended."

Meanwhile, policy finance support for small businesses and SMEs is also continuing through the chuseok holiday period. According to the FSC, policy finance institutions plan to provide a total of 23 trillion won in loans and guarantees to meet anticipated funding demand around the holiday. Korea Development Bank and Industrial Bank of Korea will supply operating funds of 3.7 trillion won and 9.2 trillion won, respectively, while the Korea Credit Guarantee Fund will provide 10.1 trillion won in guarantees.

rim@heraldcorp.com