Seoul’s move to ease burdens on shuttered firms shifts private debt risks onto state, raising sustainability questions

South Korea will extend repayment terms for guaranteed loans held by shuttered small business owners to as long as 15 years, the Ministry of SMEs and Startups said on Thursday. Beginning Friday, borrowers who operated between April 2020 and June 2025 but have since closed their businesses can convert existing loans backed by regional credit guarantee foundations into new facilities with a two-year grace period and a 13-year installment plan. The loans will carry interest rates pegged to the five-year government bond yield plus 0.1%, or about 2.95% as of Sept. 1, with guarantee fees fully subsidized by the state.

The program will first be available through Kookmin, Nonghyup and Shinhan banks before expanding to other lenders between September and October. It was funded through the second supplementary budget and is aimed at easing repayment burdens for small business operators affected by the pandemic.

South Korea will extend repayment terms for guaranteed loans held by shuttered small business owners to as long as 15 years, the Ministry of SMEs and Startups said on Thursday. Beginning Friday, borrowers who operated between April 2020 and June 2025 but have since closed their businesses can convert existing loans backed by regional credit guarantee foundations into new facilities with a two-year grace period and a 13-year installment plan. The loans will carry interest rates pegged to the five-year government bond yield plus 0.1%, or about 2.95% as of Sept. 1, with guarantee fees fully subsidized by the state.

The program will first be available through Kookmin, Nonghyup and Shinhan banks before expanding to other lenders between September and October. It was funded through the second supplementary budget and is aimed at easing repayment burdens for small business operators affected by the pandemic.

Get your
KoreaPro
subscription today!

Unlock article access by becoming a KOREA PRO member today!

Unlock your access
to all our features.

Standard Annual plan includes:

• Receive full archive access, full suite of newsletter products

• Month in Review via email and the KOREA PRO website

• Exclusive invites and priority access to member events

• One year of access to NK News and NK News podcast

There are three plans available:
Lite, Standard and
Premium.

Explore which would be
the best one for you.

Explore membership options

© Korea Risk Group. All rights reserved.
No part of this content may be reproduced, distributed, or used for
commercial purposes without prior written permission from Korea Risk
Group.