Gyeonggi Province signed an agreement with Gyeonggi Credit Guarantee Foundation and Nonghyup Bank on Oct 27

Support fund of KRW 10 billion to restore financial credibility of failed startups with limit of KRW 100 million for each company

◇ Gyeonggi Governor Nam Kyung-pil visited the Sihwa plating complex on July 14. his first company site visit after taking office, and said, “By restoring the financial credibility of failed startup founders, who are vulnerable members of society, I will make ‘comebacks’ possible in Gyeonggi Province.”

Gyeonggi Province, for the first among local Korean autonomies, is operating a comeback system for failed startup entrepreneurs.

The province signed a ‘special hope credit and loan support agreement for restarting failed startups’ with the Gyeonggi Credit Guarantee Foundation and Nonghyup Bank on the morning of October 27 at the Northern Gyeonggi Provincial Government Complex.

Carried forward as part of Governor Nam Kyung-pil’s pledges (‘Provision of a Comeback Support System for Failed Startups’), the agreement reflects Governor Nam’s determination “to make ‘comebacks’ possible in Gyeonggi Province” for failed startup founders, who are vulnerable members of society, by restoring their financial credibility.

Under the agreement, Gyeonggi Province, the Gyeonggi Credit Guarantee Foundation, and Nonghyup Bank will start operation of a ‘special hope credit support fund’ of KRW 10 billion from November 1 with a plan to support over 100 companies within a maximum limit of KRW 100 million for each company.

The Gyeonggi Credit Guarantee Foundation guarantees the full loan amount and Nonghyup Bank grants the loans while Gyeonggi Province pays 2% of the interest borne by companies.

The province explained that, under the current system, there is no means by which a company can get credit support if the company is in payment default on a loan from a financial institution. Most startups exhaust their own funds in the early stages of prototype development and product promotion, and many of them go bankrupt by the time they start manufacturing in earnest as they lack credit to purchase raw materials. 

The new ‘special hope credit support fund,’ however, provides a guarantee for a company even with overdue bank debt if the company possesses notable technology and has a viable market for its product. Nonghyup Bank then grants a loan to the company with the guarantee despite its history of overdue debt. In practice, it is normally difficult for a company with a history of overdue debt to secure a loan at a bank.

The province is also preparing an exhaustive verification system to prevent the new support system from being abused merely for the repayment of debt.

The province will organize a ‘restart evaluation committee,’ consisting of technological experts and employees of startup investing companies who can assess growth potential, so that only those companies that pass strict screening will be selected for the support program.  

On July 14, when Gyeonggi Governor Nam Kyung-pil paid a visit to the Sihwa plating complex as his first company site visit after taking office, he said he would find a way to include credit delinquency in his ‘Superman Fund’ pledge after being told of the difficulties faced by business owners with bad credit history who could not receive financial support for their comeback efforts.

At that time, Governor Nam said, “One of my pledges is the Superman Fund for youth startups. It is about providing provincial support for young startup founders with bad credit histories. I think the program should be expanded to include general business owners.”

“I’m considering a system in which the province provides surety for those companies that went bankrupt due to circumstances beyond their control despite possessing technical capacities and notable performances. As this is currently a nonexistent system, I will put it up for a discussion right away and set up a system that makes it possible to restart in Gyeonggi Province,” he added.

◇ Gyeonggi Province signed a ‘special hope credit and loan support agreement for restarting failed startups’ with the Gyeonggi Credit Guarantee Foundation and Nonghyup Bank on the morning of October 27 at the Northern Gyeonggi Provincial Government Complex.

http://gnews.gg.go.kr/news/news_detail.asp?number=201410271138247055C052&s_code=C052