The Financial Services Commission held the sixth meeting on propelling a transition to productive finance with officials from banks, public guarantee institutions, and related organizations on November 2. At today’s meeting, officials discussed measures to supply guaranteed loans for the small- and medium-sized enterprises (SMEs) and middle-market enterprises (MMEs) operating in regional economies and ways to improve the accounts receivable financing system.
Key Measures
a) Supplying guaranteed loans to SMEs and MMEs in regional economies
The government has been pursuing a regionally well-balanced economic growth model (known as the “five-pole-and-three-special” strategy) to address the problem of concentration in and around the capital region and promote the growth of regional economies. The productive finance initiative and the financing priority given to regional economies are part of this effort. However, as SMEs are struggling with growing delinquency rates, the banking sector has decided to make special contributions to provide targeted assistance in the form of guaranteed loans to the SMEs operating in the “five-pole-and-three-special” regions.
To this end, banks will make special contributions in the amount of KRW300 billion for three years. Based on this, the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation will supply financing guarantees worth about fifteen times of the special contribution amount. This will enable the supply of about KRW4.5 trillion worth of guaranteed loans to the SMEs and MMEs operating in the “five-pole-and-three-special” regions over the next three years.
The SMEs and MMEs eligible to receive guaranteed loan support will be recommended by the municipal and provincial governments in their regions. There will be fourteen municipal and provincial governments from the “five-pole-and-three-special” regions that will be eligible to participate in the selection process. An expert review committee will be set up consisting of officials from the government, banking sector, and academia to comprehensively evaluate various factors and make financial selection decisions. In addition, banks will be given incentives for supplying this guaranteed loan support to local SMEs and MMEs to promote more active participation from them.
The application process will take place until the end of 2026 and a selection committee will be set up by January 2027 so that the supply of guaranteed loans to businesses can begin from the first quarter of next year.
b) Seeking improvements to accounts receivable financing
To make the settlement of accounts receivable faster and safer for SMEs, authorities will seek to bring about the following improvements.
First, the period for settling accounts receivable will be reduced to within sixty days starting from February 2027 to make sure that SMEs can more quickly receive payments for the services and products they delivered to large companies. In 2025, there were about KRW117 trillion worth of accounts receivable with a settlement period lasting longer than sixty days, which runs against the purpose of the Act on the Promotion of Mutually Beneficial Cooperation between Large Enterprises and Small and Medium Enterprises. Thus, with the reduced settlement period, SMEs will be able to more quickly get their hands on cash flows, while companies will also be able to save some KRW36.3 billion in interest payments every year.
Second, the practice of imposing recourse on the sellers (SMEs) of accounts receivable by banks for risk management purposes—which makes up about 50 percent of accounts receivable handled by banks every year—will be abolished in principle from January 2027. The recourse treatment on the existing accounts receivable will be abolished when they reach maturity or once they enter a renewal. With the abolishment of recourse on accounts receivable factoring, the burden of debt obligation will be reduced for SMEs (by about KRW26.9 trillion a year).
Third, the refund for upfront interest payments made by sellers (SMEs), which in some cases is currently paid out to buyers (large companies) if early payments are made by the buyers, will be paid out to sellers at all times from January 2027. Thus, the sellers that make upfront interest payments will always be the ones that receive the refund for upfront interest payments. Some KRW8.3 billion in refunds for interest payments that used to be made out to buyers will be paid out to sellers at all times.
Anticipated Effects and Further Plan
These measures have been drawn up to more proactively assist the SMEs and the suppliers and subcontractors operating in local economies as they are assumed to be the first to be hit by potential interest rate hikes in the future. The KRW4.5 trillion worth of guaranteed loan support will offer low interest rate financing options to some 9,000 businesses in the “five-pole-and-three-special” regions over the next three years. With the improvements made to the accounts receivable financing system, SMEs will be able to more quickly and safely receive payments. Some KRW117 trillion every year in accounts receivable is expected to be paid out earlier than before. Additionally, the previously unreasonable burden of interest payments worth about KRW44.6 billion every year and that of guaranteed debt obligations worth about KRW26.9 trillion a year will be lifted for SMEs.
The FSC and related organizations will promptly implement these measures to make sure to supply low interest rate financing options to SMEs and MMEs from the first quarter of next year.
* Please refer to the attached PDF for details.