Korea Increases Low-Credit Business Support

Why this is here: The percentage of selected businesses with less than three years of operation increased by 25 percentage points after the change to the priority assessment system.

South Korea’s Ministry of Small and Medium Business saw a 67 percentage point increase in support for low-credit businesses after switching from a first-come, first-served application process to a priority assessment system. Previously, applications closed quickly, sometimes within five minutes, causing frustration for business owners. The new system evaluates applicants based on credit score, prior funding, location, and years in business.

The ministry received roughly 40,000 applications last month and selected about 3,000 for loan review. The program offers up to 30 million won—about $22,000 USD—to small business owners with credit scores of 839 or below, at an interest rate of 5.04% as of the second quarter of this year.

The change also benefitted businesses in non-capital regions and those experiencing population decline, increasing their selection rate by 27%. While the system shows promise, the ministry will continue loan reviews this month and assess the long-term effects of the new evaluation criteria.