South Korea announces 14.9 trillion won financing package for small firms

Import insurance premiums cut 50%, tax deadlines extended for companies

The package, announced during an emergency economic meeting at Government Complex Sejong, targets companies facing rising raw-material costs and financing pressure as the won remains weak against the U.S. dollar, the government said.

Of the total, 13.8 trillion won ($9 billion) comes from redirecting unused capacity in a 23.7 trillion won policy-financing program previously established in response to the Middle East crisis. An additional 1.1 trillion won ($719 million) in new financing was also approved. Officials said the total could be increased depending on demand and the pace at which available funding is used.

The Korea SMEs and Startups Agency will establish a special emergency stabilization fund for companies affected by the exchange rate, according to the government. Small companies that import raw materials or components worth at least 20% of annual sales will be allowed to apply without meeting an existing requirement that sales or operating profit must have fallen by at least 10%.

The Export-Import Bank of Korea will increase its special crisis-response program from 7 trillion won ($4.6 billion) to 8 trillion won ($5.2 billion), the government said. The bank will also raise its maximum interest-rate reduction from 2 percentage points to 2.2 percentage points. A new ultralow-interest loan program will provide financing at rates close to the state-run bank’s own funding costs for companies affected by the high won-dollar exchange rate.

The Korea Technology Finance Corp. will raise the coverage ratio for its emergency business stabilization guarantees from 95% to 100%, and the reduction in guarantee fees will increase from 0.3 percentage points to 0.4 percentage points, according to the announcement. Companies already using government policy loans may also receive repayment deferrals and loan-maturity extensions.

The government will expand import insurance and currency fluctuation insurance to help businesses manage exchange-rate risks. Small and midsize companies without an export record will now be allowed to purchase import insurance, which was previously more difficult for companies focused primarily on the domestic market to obtain. Import insurance premiums will be discounted by 50% through April 2027, according to the government.

The amount available under the government’s currency fluctuation insurance program will increase from 1.2 trillion won ($785 million) to 1.3 trillion won ($850 million). Premium discounts for small companies will double from 15% to 30%. Eligibility will also expand from selected raw-material importers to companies importing nearly all categories of goods, excluding luxury products, officials said.

The government will establish a separate 10 billion won ($6.5 million) export-voucher program for companies affected by the exchange rate. The maximum trade-insurance premium support available through the voucher system will temporarily double from 10 million won ($6,500) to 20 million won ($13,100). Insurance support will also be paid in advance rather than reimbursed after the insurance contract ends, the government said.

Small companies borrowing from the Export-Import Bank of Korea will be offered a free option to convert loans between the won and foreign currencies or between two foreign currencies, according to the announcement.

Tax relief measures were also announced. Payment deadlines for corporate income tax, value-added tax, individual income tax and customs duties may be extended for companies experiencing exchange-rate-related financial difficulties, the government said.

The government will provide consulting to help companies reflect currency movements in agreements that link subcontracting payments to changes in raw-material costs. Companies that effectively operate the system may receive incentives, including exemptions from certain government-initiated investigations into subcontracting practices, according to the announcement.

Financial institutions will receive credit under a government evaluation index for providing assistance to small companies affected by the weak won, officials said. Regional export support centers will serve as one-stop contact points for companies seeking information on financing, insurance, tax relief and other assistance.

The government said it would continue reviewing the difficulties faced by businesses and consider additional measures if needed.