The South Korean government vowed to grow the country’s asset financing market to 6 trillion won ($5.5 billion) in five years to aid the country’s small- and mid-size companies struggling to secure traditional loans.

The Financial Services Commission (FSC) on Wednesday unveiled measures to allow more small- and mid-size companies in Korea to secure loans using their balance sheet assets, including machinery, inventory assets and accounts receivables.

“We have come up with measures to improve banks’ asset-backed finance, a major part of corporate financing,” for the sake of companies, said Choi Jong-ku, chairman of Financial Services Commission. “The measures should expand loans for startups on death valley that experience difficulty three to seven years after launching businesses.”

To promote the asset financing, the FSC aims to nurture the country’s asset financing market with a value of 200 billion won as of the end of last year to 3 trillion won in three years and 6 trillion won in five years.

According to the FSC’s roadmap, the new measures will be implemented in four stages - improving operation system, providing incentives, nurturing infrastructure, and enforcing legislation.

In particular, the FSC will completely overhaul lenders’ current credit loan system to allow not only companies in the manufacturing sector but also those in the service and retail industries to secure loans through asset financing. Companies will be even allowed to use half-finished and finished goods as collateral. The FSC is also considering lifting the cap on the loan-to-value ratio that is currently set at 40 percent in the long term.

To stimulate the asset financing market, the regulator will also set aside 1.5 trillion won worth of policy finance funds over the next three years.

By Lee Seung-yoon and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]