ISSUE BRIEFING

Government to Clear KRW 2.2 Trillion in Small Business Guaranteed Debt, Reopening Paths to Recovery Blocked by Arrears

On June 19, the South Korean government announced a comprehensive overhaul of the small business guarantee system through the 'Establishment Plan for a Sustainable Guarantee Support System' during a meeting of the Emergency Economic Headquarters. Over the five-year period from 2026 to 2030, the government will clear KRW 2.2 trillion in distressed guarantee assets through write-offs and debt adjustments, affecting an estimated 130,000 businesses. The plan reopens guarantee channels previously blocked by arrears and closures by permitting new guarantees for written-off businesses with cleared public records and for bankruptcy-exempt individuals who undergo rapid write-offs. To enhance the soundness of guarantee institutions, the government will prohibit full guarantees in principle, lowering the average guarantee rate from 94.3% to 90% by the end of 2027 and the re-guarantee rate from 50% to 30%. Additional goals include relaxing the guarantee limit to KRW 800 million for growth-oriented small businesses, introducing intellectual property (IP) guarantees, supplying KRW 2 trillion in region-specific guarantees by 2030, and reducing the subrogation rate from 5.07% at the end of 2025 to 3.2% by 2030.