FSC to ease restrictions on loans for start-ups

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FSC to ease restrictions on loans for start-ups

The Financial Services Commission announced new measures yesterday to allow local start-ups with cutting-edge technology greater access to loans even without a track record of substantial revenue.

Part of the agency’s on-going campaign to make financing easier for cash-strapped start-ups and small- and medium-sized enterprises (SMEs), the measures aim to equip state-run loan guarantors with additional personnel to better gauge the value of start-ups’ technologies. They also hope to encourage credit guarantees for new forms of technology that integrate elements from multiple fields.

“The Korea Credit Guarantee Fund and the Korea Technology Finance Corp. have been supporting the financing of SMEs that lacked collateral but possessed excellent technology and potential,” said Koh Seung-beom, director general at the Financial Policy Bureau of the FSC.

When SMEs take out loans from financial companies, the two state-run guarantors vouch for the payment of the loan to prompt risk-averse lenders to extend credit to SMEs.

“However, credit guarantors’ ability to evaluate integrated technologies or industries - such as cultural content - is insufficient, while financing difficulties continue to exist for companies at the commercialization stage after developing technologies.”

Starting July, the FSC will implement a new system at the Korea Technology Finance Corp. that evaluates SMEs for credit guarantees based on the forecasted profits the company’s patented technology is expected to bring over the duration of its patent.

To encourage more young people to start their own businesses, the Korea Credit Guarantee Fund and the Korea Technology Finance Corp. are also expanding their credit guarantee limit for start-ups founded by younger citizens from 30 million won ($26,430) to 50 million won no matter the company’s current revenue.

By Lee Jung-yoon [joyce@joongang.co.kr]

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