To Help SMEs in Financial Need

Industrial Bank of Korea and SK Group set up joint fund to support cash-strapped SMEs

The Industrial Bank of Korea (IBK) and the SK Group set up a 120 billion won fund to help SMEs in financial trouble with each side chipping in 60 billion won, the bank announced recently.
The loans from the fund will bear an annual interest rate 2.35 percent lower than the maximum bank interest rate with the maximum loan amount per case set at 500 million won, the bank said.
IBK and SK Group agreed to form the fund to help SME subcontractors or vendors under the SK Group that are faced with financial troubles.
Applications for loans from the fund should be submitted to SK Group, which will choose the borrowers who are subcontractors and vendors and have top-rate technologies and promising business prospects. The group will select qualified borrowers and recommend them to IBK to get the loans.
IBK has also set up a fund amounting to 2 trillion won jointly with Korea Development Bank (KDB) to be provided to businesses that need facility investment funding.
KDB will chip in 1.4 trillion won toward the fund and IBK will ante up 600 billion won for firms to invest in their facilities. KDB will dish out 600 billion won in loans by October and the rest of the fund will be handled by a policy financing company to be set up later, the bank said.
The banks will select the borrowers through credit analyses. Part of the fund will also be provided to asset management and private equity funds operated by securities firms under a diversified way to supply the fund directly or indirectly.
Both banks will provide funds for securities firms to form PEFs, up to 40 percent of their needed funds if the funds are intended for facility investments.
Loans provided to PEFs will depend on the scale of funds, track records of borrowers and fees as analyzed by both KDB and IBK.
As private firms may be able to invest in PEFs, the facility investment fund will exceed the initial 2 trillion won.
Details of the terms and conditions for borrowers will be jointly designed by KDB, IBK and the Korea Financial Investment Association. PEFs will make loans or investments in corporate businesses in such areas as bonds, common stocks, long-term bonds and convertible bonds. PEFs will mainly deal with common stock investments. Both KDB and IBK have set up special teams in charge of handling the Fund and have already contacted such business organizations as the Federation of Korean Industries, the Korea Chamber of Commerce and Industry and the Korea Small and Medium Business Association to let them know they are in operation and to find potential borrowers for the Fund.
The Fund is to be officially made available to corporate borrowers from September, following the completion of preparations to launch it, including an intensive ad campaign jointly with the FKI and KCCI, especially on the necessary qualifications to borrow from the Fund.
Indirect fund supply through private financial firms will be explained through the Korea Financial Investment Association. Applications from private financial firms have been accepted since August.
Both KDB and IBK continue to work on the formation of PEFs to meet the funds required for facility investments by businesses this year with funds provided by the National Pension Service and institutional investors to amply meet the corporate fund requirement for facility investments.
The Fund is expected to be a boon for corporate facility investment as it will supply tailor-made funds to businesses to make investments in new facilities, thereby boosting the nation’s competitiveness with its growth engines made strong and, in the process, helping the economy break out of its slump and resurge.
Both KDB and IBK will make loans to corporate borrowers based on the results of their credit standings in a variety of manners including investments in stocks, both common and preferred, bonds and convertible bonds, among others. Direct loans will also be made if the situation requires. Loans will be made in a number of foreign currencies including the U.S. dollar, yen, Euro and others, depending on the borrowers needs.
KDB will make loans to businesses that want to invest in new growth engine businesses, build infrastructure or invest in business areas with great risks or of such a large scale of investment that funding is necessary. IBK will make loans to SMEs that lack funds but are rich in technologies. nw

President Yun Yong-ro of the Industrial Bank of Korea.