Entrepreneurs’ share of business loans near 30%

As more retired baby boomers start their own small businesses, loans taken out by private entrepreneurs accounted for nearly 30 percent of business loans at the end of November.

According to the Bank of Korea yesterday, loans taken out by private entrepreneurs at banks were valued at 189.7 trillion won ($180.2 billion) last month, 29.8 percent of the total 636.5 trillion for all business loans.

The ratio of private entrepreneurs’ borrowing from banks has gradually grown since the 2008 global crisis. In 2009, entrepreneurs’ loans were 27 percent of total corporate loans. This grew to 28.1 percent the following year and 29.4 percent as of the end of last year.

The growing debt of private entrepreneurs has been become a major social and economic concern. Retired baby boomers who invest most of their retirement paychecks and savings into starting their own businesses are also a part of that concern because many of them end up closing down due to fierce competition.

“While borrowing by private entrepreneurs continuously expands, many are at risk as most are elders whose start-up consists mostly of loans with real estate put up as collateral,” said an official with the central bank.

The official said many see their credit risk rise as fierce competition in the market as well as low housing prices put them in a position where they can’t even pay the principal on their loans.

“They put themselves in a position where they are forced to become lower-class households if their business fails and the debt-payment burden intensifies,” the official said.

Since summer, the number of private entrepreneurs who failed has been growing rapidly.

Last month, 36,000 entrepreneurs went out of business, although this is half of the 66,000 who went out of businesses in October.

BY LEE HO-JEONG [ojlee82@joongang.co.kr]