SMEs owed average 774 million won by Homeplus; 40% unpaid over 500 million won

Small and medium-sized enterprises that supplied goods to Homeplus are owed an average of 774 million won ($563,000) in unpaid deliveries, a new survey has found. More than 40 percent of the affected companies have not received 500 million won or more. As Homeplus's corporate rehabilitation proceedings drag on, the liquidity strain on supplier SMEs is spreading to raw material payments and payroll.

The Korea Federation of Small and Medium-sized Enterprises on Tuesday released findings from a survey of 150 Homeplus suppliers experiencing payment delays. The survey was conducted to assess the state of outstanding payments to small suppliers and explore remedies following the launch of Homeplus's corporate rehabilitation proceedings in March last year.

Some 76.7 percent of respondents said they were experiencing business difficulties due to Homeplus's payment delays — 34.7 percent described their situation as "very difficult" and 42.0 percent as "difficult."

The average amount of unpaid deliveries, excluding extreme outliers, stood at 774 million won. Companies owed 500 million won or more accounted for 40.7 percent of respondents. Of those, 16.7 percent were owed between 500 million won and 1 billion won, while 24.0 percent were owed 1 billion won or more.

Payment delays are also growing longer. Some 98.0 percent of respondents said their payments had been delayed more than 60 days past the delivery date. In effect, nearly all surveyed companies have gone months without recovering what they are owed.

The most commonly cited hardship was difficulty paying for raw materials and subcontracting costs, reported by 85.3 percent of respondents. That was followed by insufficient operating funds for new product development and marketing at 65.3 percent, delayed payroll and the risk of workforce attrition at 24.7 percent, and the burden of repaying bank loans and the risk of credit rating downgrades at 10.0 percent.

Supplier SMEs are calling for their outstanding payments to be settled before any discussion of Homeplus's normalization. The most urgently demanded measure — cited by 95.3 percent of respondents — was the use of proceeds from the sale of Homeplus Express as collateral to secure lender financing and prioritize payment settlement.

Some 44.0 percent of respondents called for government emergency business stabilization funds and expanded low-interest special loans, while 39.3 percent demanded stronger payment systems, including mandatory third-party escrow for supplier payments.

Kim Hui-jung, head of the economic policy division at the Korea Federation of Small and Medium-sized Enterprises, said supplier SMEs are facing an unexpected liquidity crisis as Homeplus's payment delays drag on. "Homeplus can only be normalized if the survival of its supplier SMEs is guaranteed," Kim said. "These companies bear no responsibility whatsoever for Homeplus's management crisis, so their survival must come first."