Busan's 1.2 Trillion Won Interest Support Program Draws Flood of Applications from Small Business Owners

As Busan city launched its 1.2 trillion won program covering loan interest for small business owners, some 6,000 applications flooded in on the first day alone. Small business owners refer to operators of small shops or self-employed individuals, and the interest support program has the city paying the interest accrued on their loans. Kim Hyeong-jin, head of guarantee operations at the Busan Credit Guarantee Foundation, said the foundation is working to process applications quickly, noting that "applications are surging thanks to the unprecedented interest support."

A real-life example shows just how much the interest burden can shrink. A home appliance parts wholesaler who took out a 30 million won loan faced a bank interest rate of 5.13%. With Busan city covering 4 percentage points of the interest, the actual rate fell to 1.13%.

However, securing a low rate and borrowing the desired amount are two different matters. One tutoring academy operator who applied for a 70 million won loan actually received only 20 million won, as loan limits vary depending on credit rating, revenue, and repayment capacity.

The scope of interest support also shrinks over time. It starts at 4 percentage points in the first year before dropping to 2 percentage points thereafter. Additional costs, such as guarantee fees and early repayment penalties, may also apply.

"Even though rates are low, borrowers need to consider the repayment method as well," explained Cheon Ji-hyeok, a manager in the corporate banking division at BNK Busan Bank. "Because it uses installment repayment, monthly payments are required, so it's important to use the program in line with your financial plan."

The amount the Busan Credit Guarantee Foundation has paid off on behalf of small business owners has grown fivefold over the past three years. A lower interest rate does not mean the repayment burden disappears.