A youth startup financing agreement brokered by Democratic Party of Korea lawmaker Jeon Hyun-hee with Hana Bank, the Korea Credit Guarantee Fund and the Korea Technology Finance Corp. has been turned into an actual loan product, offering up to 300 million won ($217,000) at interest rates in the 3 percent range.
According to Jeon's office Tuesday, Hana Bank and the Korea Technology Finance Corp. launched their linked youth startup loan product Monday. A separate product linking Hana Bank with the Korea Credit Guarantee Fund is set to launch Thursday. The total guarantee supply across both products stands at 200 billion won.
The Korea Credit Guarantee Fund and the Korea Technology Finance Corp. will each provide 100 billion won in guarantees, backed by Hana Bank's contributed funds. The program targets youth-led companies that started within the past seven years and meet each guarantee agency's eligibility requirements. Working capital support of up to 300 million won per company is available, with a guarantee coverage ratio of 100 percent or as determined by the terms of the guarantee certificate.
Hana Bank will cover the full guarantee fee — at an annual rate of 0.3 percentage points — for three years. Loan interest rates are expected to range from 3.6 to 3.9 percent, depending on individual conditions such as credit rating.
The products launched just four days after Hana Bank, the Korea Credit Guarantee Fund and the Korea Technology Finance Corp. signed a special contribution agreement Friday, led by Jeon. The lawmaker has been building toward the initiative since July, when she held a policy forum with the Korea Financial Industry Union, followed by roundtable discussions with young entrepreneurs and consultations with the financial sector and regulators. On Aug. 12, she signed a policy agreement with the union on youth employment and startup support.
"One of the biggest barriers young entrepreneurs face is difficulty raising funds due to a lack of collateral and credit, despite having good technology and ideas," Jeon said. "With an actual financial product now on the market, a 'startup financial ladder' that young people can feel on the ground has truly been put in place."
She added that the initiative — offering up to 300 million won in financing, 100 percent guarantees, full coverage of guarantee fees for three years and interest rates in the 3 percent range — represented a financial innovation investing in young people's technology and potential. "I hope this model serves as a catalyst that draws other commercial banks into participating voluntarily," she said.
Jeon said she would continue working with financial authorities and the banking sector to expand the "startup financial ladder" across all banks, so that young people's potential is no longer blocked by collateral and credit requirements.
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