Moon promises 100 trillion won
Specifically, the government will be changing the way loan requests are evaluated and offer low-interest loans to companies that use production facilities as collateral.
Smaller companies, especially start-ups, have long struggled to get financing, as most banks want them to pledge property.
“Lending customs focusing on past performance and real estate collateral have been a shackle for innovative start-up companies,” President Moon Jae-in said in announcing the government’s financial innovation vision at the Industrial Bank of Korea headquarters in central Seoul on Thursday. The government “will strongly push forward with an innovative finance program that will lead future technology innovation.”
He said that in order to create the “second venture boom,” more is needed on top of the government’s efforts. The financial system must be developed to encourage innovation, and the president asked banks and other institutions to adjust their thresholds for extending credit.
“Companies like Apple and Amazon, which began as start-ups, were able to grow into global companies with the help of innovative financing that turned their ideas into businesses,” Moon said. “We should also [provide loans] not based on real estate or past performance but on the possibility of future growth of companies based on ideas and technologies.”
He said, starting this year, companies will be able to get loans backed with non-real estate assets, such as machinery, inventory and accounts receivable.
The 100 trillion won of funding for the next three years will include 90 trillion won of technology financing, loans and loan guarantees provided by state-owned financial institutions including the Korea Development Bank and the Korea Technology Finance Corporation. These loans will be based on a company’s technology personnel and research and development abilities.
In addition, 6 trillion won will be provided to companies offering patents and production facilities as collateral. This is a newly-created loan program.
The government will also introduce a loan-evaluation system where a start-up can borrow money based on their potential growth or the potential growth of the new industry. This evaluation will be assessing the value of the companies, including their technological skills and salesmanship.
President Moon said the government will improve regulations so that more companies will be able to list on the stock market, where they will be able to secure needed investment.
“Over the last three years, the number of fourth industrial revolution companies and biopharmaceutical companies that were newly listed on the Kosdaq amounted to 38,” President Moon said. “In the next three years, 80 such companies will list.”
The government will be easing listing standards. It will also be lowering the trading tax.
The tax imposed on trading stocks on the Kospi and Kosdaq will drop from the current 0.3 percent to 0.25 percent, while the tax on unlisted securities will be lowered from 0.5 percent to 0.45 percent.
The taxation on stock trading was introduced in 1963, and the rate has remained the same since 1996.
On Wednesday, Financial Services Commission (FSC) Chairman Choi Jong-ku noted the role of small start-ups in the nation’s economic growth.
“Start-ups are small but they are quick. Their ideas and technologies not only create new value added but also lead in creating jobs,” Choi said. “But as these new industries also have a huge potential for failure, a financial system that can diversify and spread the risk that follows from challenges is necessary.”
The FSC chairman said the commission will remain firm in banning initial coin offerings (ICO), which have been considered as a new means of securing investment capital for start-ups.
“It’s important to see what has happened with ICOs so far,” Choi said. “Securing investment is closely related to protecting investors, so we should proceed cautiously.”
He said, until now, there have been numerous cases of ICOs where investors have been harmed.
BY LEE HO-JEONG [firstname.lastname@example.org]