"We have not received over 500 million won in payments from Homeplus, which has prevented us from paying our suppliers on time. We are continuously looking for ways to secure funding, but it is not easy," said a representative from Company A, a processed food manufacturer based in Jeonju, highlighting the severe management difficulties caused by the prolonged delay in payments from Homeplus, which accounts for half of their sales.
As Homeplus's corporate rehabilitation process drags on, small suppliers are increasingly anxious. Payments that should typically be settled within two months have been delayed for several months, creating urgent cash flow issues. Companies that rely heavily on Homeplus are facing staff reductions and production disruptions as they struggle to survive. Suppliers are hoping for swift normalization of payments through decisive action from the government and creditors.
According to industry sources, the total unpaid amount owed to suppliers in the agricultural, fruit, livestock, and processed food sectors by Homeplus is estimated to be around 200 billion won. This figure is based on a sample of some suppliers, suggesting that the overall impact on all partners is likely much larger. Currently, there are 4,600 suppliers providing goods to Homeplus.
The financial strain on small and medium-sized enterprises (SMEs) and small businesses is significant. A survey by the Korea Federation of Small and Medium Businesses found that 76.7% of 150 small suppliers experiencing payment delays reported facing operational difficulties. Among them, 34.7% described their situation as "very difficult," citing severe cash flow problems. Instances of payment delays exceeding the legal deadline of 60 days were reported in 98% of cases.
The unpaid amounts have surged to unmanageable levels. On average, small businesses have not received 770 million won in payments. One in four suppliers (24.0%) reported unpaid amounts exceeding 1 billion won. This has led to delays in purchasing raw materials and subcontractor payments (85.3%), exacerbating the chain of damage.
The CEO of Company B, which has supplied underwear products to Homeplus since 2007, stated, "80% of our sales come from Homeplus, but since January, payments have effectively stopped, completely halting our cash flow." He added, "As a result, two-thirds of our employees have left, and we are barely managing with minimal staff, struggling to pay our production partners on time, making normal operations nearly impossible."
As the situation continues, suppliers are seeking ways to secure operating funds, even at a loss. A representative from Company A noted, "We are considering factoring our receivables, as we are struggling to cover basic costs like raw materials and labor." Factoring involves financial institutions purchasing a company's receivables and providing upfront payment, allowing for quicker cash flow, though it reduces profitability due to discount rates.
Fortunately, suppliers to Homeplus Express have recently found some relief. NS Shopping, which has signed a sale agreement for Homeplus's supermarket division with Harim Group, has provided payment guarantees to over 120 partners of Homeplus Express, ensuring timely payments starting from June.
Small and medium-sized enterprises and suppliers are urging for a swift return to normalcy for Homeplus's supermarket division, while also calling for appropriate support from creditors and the government. The Korea Federation of Small and Medium Businesses' survey indicated that suppliers consider urgent measures such as creditor support and loans utilizing the proceeds from the Express sale (95.3%), as well as government emergency management stabilization funds and expanded low-interest special loans (44.0%).
Kim Hee-jung, head of the Economic Policy Division at the Korea Federation of Small and Medium Businesses, emphasized, "Despite facing an unexpected liquidity crisis due to the prolonged payment delays from Homeplus, many suppliers still wish to maintain their business relationships. The survival of these companies must be prioritized during the normalization process."
* This article has been translated by AI.
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