Credit loan ads in downtown Seoul (Image courtesy of Yonhap)
SEOUL, Jan. 9 (Korea Bizwire) — A new survey reveals that one in three small business owners in Korea increased their borrowing in 2024, highlighting the ongoing financial challenges faced by the sector.
According to a study released on January 8 by the Korea Federation of SMEs (KBIZ), 34.9% of small business owners who hold loans reported an increase in their borrowing compared to the previous year. The survey, conducted from November 12 to December 6, included 800 small business owners, of whom 590 had existing loans.
The increase in borrowing was particularly pronounced in the Chungcheong (41%) and Jeolla (44.3%) regions, which showed higher rates than other areas of the country.
The average interest rate on loans was 4.99%, with 65.9% of borrowers paying rates exceeding 5%. Breaking down the interest rates, 38.6% of loans carried a 5% rate, while 27.3% were above 5.1%, and 23.9% fell between 4% and 4.9%.
When asked about the most crucial support policies needed, an overwhelming 80.8% of respondents identified financial assistance as their top priority, followed by marketing support (9.9%), entrepreneurial small business development (2.4%), and promoting a culture of mutual growth (1.9%).
The outlook for 2025 appears pessimistic, with 55.6% of respondents expecting business conditions to worsen compared to 2024. While 39.5% anticipated conditions would remain similar to the previous year, only 5% forecast improvements.
Key challenges cited by business owners included rising costs of raw materials and supplies amid high inflation, domestic market stagnation, loan repayment burden, and difficulties with labor costs and workforce recruitment.
Despite these challenges, 93.5% of respondents indicated they were not considering closing their businesses. KBIZ attributed this to the fact that most small businesses are established for livelihood purposes rather than growth opportunities.
Ashley Song (ashley@koreabizwire.com)
