K bank expands real estate-backed loans for sole proprietors, raises facility loan cap to W1b

K bank is broadening the range of eligible collateral for its real estate-backed loans to sole proprietors to include residential complexes and commercial properties, while also extending support to facility loans for business premises purchases.

The bank announced Wednesday that it would expand the collateral types, loan purposes and eligible business categories under its "Sajangnim Real Estate-Backed Loan" product for individual business owners.

Previously, only apartments with valuations listed by the Korea Real Estate Board could be used as collateral. Going forward, eligible collateral will expand to include all jointly owned residential buildings whose market prices can be verified through the Korea Real Estate Board, KB or an automated valuation model. Commercial properties such as sectioned retail units and officetels whose values can be confirmed via an automated valuation model will also be accepted as collateral.

The permitted use of loan proceeds will expand beyond working capital to include facility financing. New facility loans can be used to purchase business premises, and borrowers may also refinance existing facility loans taken out at other banks. The change effectively widens the loan's scope from day-to-day operating needs to capital investment for securing a place of business.

The facility loan limit is capped at 1 billion won ($746,000). New loans carry a maximum term of 20 years, while refinancing of existing loans is capped at 15 years. Both new and refinanced loans offer a grace period of up to three years.

Real estate rental businesses will be added to the list of eligible industries. Residential building rental operations are excluded, however, and loans for rental purposes will be subject to the rent-to-income ratio and other applicable standards.

K bank's outstanding loans to individual business owners more than doubled in a year, rising from 1.6 trillion won at the end of the second quarter last year to 3.3 trillion won at the end of the second quarter this year. The bank plans to sustain that growth by broadening collateral types and loan purposes, and intends to launch loans for small and medium-sized corporations next year to expand its corporate banking business.

"By expanding eligible collateral to include residential complexes, retail units and officetels, and by extending support to facility financing, we are now better positioned to meet the diverse funding needs of individual business owners," a K bank official said. "We will continue to strengthen our competitiveness in sole-proprietor finance and, next year, introduce loans for small and medium-sized corporations to fully launch our corporate banking operations."