Analysts suggest the growth in business loans reflects not only companies’ short-term cash flow needs but also a broader shift in strategy as firms recalibrate in response to ongoing global supply chain pressures and rising input costs. (Image courtesy of Yonhap)
SEOUL, June 10 (Korea Bizwire) — South Korean companies turned to banks at a significantly higher rate in the first quarter of 2025, with demand for operating funds driving a sharp rise in corporate borrowing, according to new data released Tuesday by the Bank of Korea (BOK).
The total outstanding loans to local companies reached 1,979.5 trillion won (approximately US$1.46 trillion) as of the end of March—an increase of 17.3 trillion won compared to the previous quarter. The jump represents a notable rebound from the fourth quarter of 2024, when corporate lending had slowed to a mere 3.3 trillion-won uptick, the lowest quarterly growth in nearly eight years.
Much of the momentum came from businesses seeking working capital. Loans for operating funds alone surged by 9.5 trillion won, reversing a 3.4 trillion-won decline in the previous quarter. Bank of Korea officials attributed this spike to a combination of seasonal and strategic factors.
“Many companies that had temporarily repaid overdraft loans at the end of last year for year-end financial ratio management reissued those loans in early 2025,” a central bank official said. “The run-up to the Lunar New Year also contributed to the increased funding demand.”
Sector-specific trends further highlighted where the borrowing was concentrated. Manufacturing firms led the surge, borrowing 8 trillion won during the quarter to bring their total outstanding loans to 491.4 trillion won—bouncing back from a 1.6 trillion-won decline in the fourth quarter. The service sector followed closely, adding 7.8 trillion won in new loans to reach a total of 1,261.5 trillion won.
Facility investment loans, another key indicator of corporate confidence, also picked up steam. These loans climbed by 7.8 trillion won during the first quarter, up from a 6.7 trillion-won gain in the prior period.
Analysts suggest the growth in business loans reflects not only companies’ short-term cash flow needs but also a broader shift in strategy as firms recalibrate in response to ongoing global supply chain pressures and rising input costs.
“The first quarter is typically a soft season for the service industry,” the BOK official added. “So it’s not unusual to see companies relying more on bank loans to bridge funding gaps during this period.”
As 2025 progresses, market watchers will be keeping a close eye on whether this uptick in borrowing signals a durable recovery in corporate investment—or a sign of rising liquidity stress amid tighter monetary conditions.
Ashley Song (ashley@koreabizwire.com)
