Homeplus suppliers face crippling payment delays

Small and medium-sized suppliers delivering to the South Korean retail giant Homeplus are facing severe financial strain due to substantial payment delays. A survey conducted by the Korea Federation of SMEs (KBIZ) revealed that, on average, suppliers are owed 774 million won (approximately $560,000 USD) in outstanding payments.

The situation is exacerbated by the fact that 98% of these suppliers reported that their payments are delayed beyond the legal limit of 60 days after delivery. This prolonged non-payment has created a critical liquidity crisis for many businesses. The most frequently cited difficulty, reported by 62.7% of respondents, is the delay in paying for raw materials and subcontracted work. Additionally, 19.3% struggle with funding for essential operations like new product development and marketing, while 14.0% face challenges in paying employee wages, risking staff departures.

Suppliers are seeking urgent support, with a significant majority (79.3%) requesting financial assistance from the creditor group, led by Meritz Financial Group, using the sale proceeds of Homeplus Express as collateral for prioritized payments. Other proposed solutions include expanded government support through emergency management stabilization funds and low-interest loans (44.0%), as well as strengthening payment systems, such as mandating third-party escrow for payments (39.3%).

Kim Hee-joong, head of KBIZ's economic policy division, stated that the prolonged payment delays have pushed many small and medium-sized suppliers into an unexpected liquidity crisis. He stressed that the normalization of Homeplus's business is contingent on the survival of these suppliers, who bear no responsibility for the company's current financial difficulties. The survival of these supplier companies must be the top priority.