Trade Financing for SMEs to Increase to 140 Trillion Won Next Year

The South Korean government plans to increase trade financing for small and medium-sized enterprises (SMEs) from 120 trillion won this year to 140 trillion won next year. The initiative aims to lower the guarantee threshold for companies with growth potential, even if they have insufficient export performance or are in a state of capital erosion. Additionally, the Korea Trade Insurance Corporation will seek to directly invest in promising export companies through related legal amendments.

On September 9, the Ministry of Trade, Industry and Energy held a meeting in Suwon, Gyeonggi Province, led by Park Jeong-seong, head of the Trade Negotiation Headquarters, with representatives from export SMEs and financial institutions to announce the 'Plan to Expand Trade Financing Support for Export SMEs.'

The scale of trade financing for SMEs will increase from 109 trillion won last year to 120 trillion won this year and 140 trillion won next year. As of September 5, the cumulative export amount has reached $709.4 billion, surpassing last year's annual performance, prompting the government to enhance financial support to prevent funding shortages from hindering export growth.

Initially, the special guarantee supply for companies struggling to use general guarantees due to capital erosion will increase from 300 billion won this year to 350 billion won, with plans to expand it to 450 billion won next year. Support will be determined based on future export growth potential rather than past performance.

A cooperative trade financing fund, supported by contributions from large corporations and banks, will be established this year with a scale of 10 trillion won to assist SMEs and medium-sized enterprises. For companies with insufficient export performance, the guarantee limit for export growth financing, calculated based on sales, will be more than doubled. Additionally, advance payment guarantees (RG) for small shipbuilders will be supplied at around 1 trillion won next year.

For first-time exporters, the government will provide free credit investigations for up to five overseas clients per company. Companies with annual exports below $5 million will also be able to use short-term export insurance without premiums, with the number of participating organizations increasing from 78 to over 85.

The support methods for trade insurance will expand from insurance and guarantees to include investments and the purchase of export receivables. The Ministry plans to amend the Trade Insurance Act this year to allow the corporation to directly invest in promising export SMEs or purchase export receivables, enabling companies to secure long-term growth funds and cash in on export receivables more quickly.

New insurance products tailored to subscription-based exports and other emerging transaction types will also be strengthened.

Park stated, "We will lower the support threshold and increase the speed of trade financing to ensure that necessary funding is provided in a timely manner, focusing not only on past export performance but also on growth potential from the first export to growth and leap forward."