While the number of business closures has decreased, many owners are still closing their doors burdened by debt, prompting calls for more robust government support for post-closure recovery.
On November 8, the Ministry of SMEs and Startups analyzed data from the National Tax Service regarding business closures and conducted a survey of 1,500 closed small businesses. The findings revealed that the number of closed businesses last year was 975,681, a decrease of 32,601 from the record high of 1,008,282 in 2024. The closure rate also fell from 9.04% to 8.64%.
Among the reasons cited for closure, 70.9% of respondents pointed to 'declining profitability and poor sales.' This decline in profitability and sales is largely attributed to weak domestic demand. Factors contributing to poor sales included a decrease in customers (62.5%), rising raw material costs due to inflation (29.4%), increased labor costs (28.8%), and higher fixed costs (22.4%).
During the closure process, business owners reported challenges such as loan repayments (45.5%), deciding when to close (37.3%), and recovering deposits and rights (30.7%). After closing, many relied on their remaining assets (33.8%) for living expenses, while others received income from work (32.8%) or assistance from family and friends (23.9%).
Of those who decided to close, 68.5% were in debt, with an average debt amounting to 85.31 million won. The average cost of closing a business was 12.86 million won, with store liquidation costs accounting for the largest share at 5.59 million won.
According to data submitted by Rep. Park Sung-min of the ruling People Power Party, the amount of bad debt from loans or guarantees extended to small businesses that have become difficult to recover has reached 3.3967 trillion won.
As sales decline and debts increase, closure has become an unavoidable choice for many small business owners. In an online community, one restaurant owner, referred to as A, stated, "With rising logistics costs, labor costs, and taxes, it's impossible to keep the business running. I want to transfer the business to the next owner, but I can't, so I'm preparing to close."
Another business owner, B, expressed disappointment while preparing to demolish their store, saying, "I received support from the Small Business Market Promotion Corporation once, so this time I have no choice but to use my personal funds."
The government plans to expand support policies for small business owners facing closure. The Ministry of SMEs and Startups announced that it would introduce an alarm system to alert small business owners with debts about potential crises and promote deferred repayments of policy funds and low-interest special guarantees upon closure.
Under the Hope Return Package, support for store demolition costs will be increased to a maximum of 6 million won, and the self-contribution for re-establishment funds will be reduced from 100% to 50%. The number of individuals eligible for the National Employment Support Program will also increase from 2,000 to 3,000.
A Ministry official stated, "Starting next year, we will continuously strengthen policies for small business owners facing closure, including expanding the Hope Return Package and alleviating financial burdens."
President Lee Jae-myung also announced on November 2 during a budget speech for 2027 that the government would provide 500 billion won to support the special adjustment of long-term overdue debts for small business owners affected by COVID-19.
Jung Soo-jung, head of the Small Business and Win-Win Research Institute, remarked, "While measures for debt adjustment for small business owners have been established, they are not being felt by the owners. To address this issue, it is necessary to develop solutions that not only resolve debt but also increase sales while reducing costs, thereby revitalizing the economy."
* This article has been translated by AI.
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