Loan limits increased, interest rates lowered for small businesses based on sales; 'Small Business Credit Scoring' to be implemented late August

South Korea is set to enhance support for its small business sector with a new credit scoring system designed to better reflect growth potential. Beginning in late August, 16 banks will adopt this specialized framework for approximately 2.2 trillion won (about $1.6 billion) in small business loans.

The "Small Business Specialized Credit Scoring System" (SCB) will integrate a "growth grade" (S grade) with existing credit grades (CB grade). This new approach will utilize a wider range of financial and non-financial data. It includes estimated sales derived from card and cash payment information, the profitability and stability of the business's commercial area, its sustainability, employee numbers, and online platform activities.

Previously, loan assessments heavily relied on the business owner's personal credit history, such as delinquency records and existing debts. This often made it difficult for businesses with strong performance or growth prospects but limited financial transaction history or lower personal credit scores to secure bank loans.

The Financial Services Commission (FSC) announced that the system's scope has expanded from an initial seven banks to sixteen, including major institutions like KB Kookmin Bank, Shinhan Bank, and Kakao Bank. The FSC estimates that around 323,000 small business owners with medium to low credit ratings could see their credit grades improve, potentially leading to new or additional loans totaling 5.4 trillion won and annual interest savings of 69.7 billion won. An additional 376,000 high-credit small business owners may also gain access to 5.1 trillion won in new or increased loans.