Suncheon offers loans up to W700m at 1 percent interest for small businesses

Interest support for two-year loans to help small and medium-sized enterprises secure operating funds.

Suncheon city is launching an interest support project to ease the financial burden on local small and medium-sized enterprises struggling amid rising interest rates and economic uncertainty.

According to Suncheon city on Wednesday, the interest support project targets manufacturers that have been operating in Suncheon for at least two years. The city is currently accepting applications from companies that take out operating loans from partner financial institutions, under which Suncheon will cover part of the interest.

Each company can borrow up to 500 million won ($373,000), or up to 700 million won if it obtains a guarantee from a credit guarantee institution. Over two years, the city will subsidize interest at an annual rate of 4 percent for general companies and 4.5 percent for preferential companies.

For example, if a corporate loan carries an annual interest rate of 5 percent, Suncheon will cover 4 percentage points of that, allowing the small or medium-sized enterprise to borrow at an effective rate of just 1 percent.

As of September, loan interest rates for small and medium-sized enterprises in South Jeolla Province and Gwangju vary depending on each company's credit standing but generally range from 4 percent to 6 percent.

Companies can choose a repayment method suited to their financial situation. The options are a lump-sum repayment after a two-year grace period or an installment repayment split over two years following the same grace period. Under the installment option, principal repayment is deferred for the first two years and then paid off over the following two years. This allows companies to manage their funds for up to four years.

Suncheon city estimated that the interest support project will cost about 1 billion won a year.

"As Suncheon's number one salesperson, I will continue to provide timely support that businesses can genuinely feel, from interest support for small and medium-sized enterprises to fostering key industries such as the defense industry," said Mayor Son Hun-mo.

Companies seeking interest support can consult on loan availability with one of the six financial institutions that have signed agreements with Suncheon city — including Nonghyup Bank, Gwangju Bank, KB Kookmin Bank and Hana Bank — and then submit an application form, business plan and other required documents to the city's New Growth Industry Division.