Hello, readers! Today, I brought some good news. Fast Track Program will be extended in 2014 which was first introduced in 2008 when SMEs in particular were hit hard by the global financial crisis. The FTP is for SMEs that are in temporary liquidity crisis. Of course, not all SMEs can get the benefit. The FTP targets SMEs that are in the gray zone where their credit ratings rank between A and D. The program involves various measures such as extension of bond maturity, reduction or exemption of interest, debt-equity swap and so on. The major purpose of the program is to help out SMEs from further sliding down to bankruptcy by providing liquidity. After 5 years of implementation, there will be several improvements made in 2014.
First, only B-rating SMEs will be able to receive supports. Previously, SMEs with A and B-ratings did get assistance, yet A-rating SMEs were often excluded due to its relative robustness.
Second, credit risk evaluation will be mandated to all SMEs each year. It was a one-time procedure in the beginning but SMEs will be obliged to get credit risk evaluation afterwards as well for transparency-related reasons. Doing so will provide benefits of the program to wider range of companies by examining the financial status of the beneficiaries and excluding those which aren’t having difficulties at the moment.
Third, the assistance will be terminated after 3 years. Up until now, duration of the assistance was not limited which is against the initial purpose of the FTP which is to help SMEs in ‘temporary’ liquidity crisis. Therefore, limiting the duration would make the financial support more effective and efficient.
Lastly, guarantee limit for KIKO-damaged SMEs will be reduced from 2 billion won to 1 billion. Since 2011, the number of SMEs hurt by KIKO has significantly been reduced to the level that no additional assistance is needed for them anymore.
As we all know, the importance of sound liquidity cannot be overstated. Any company can go bankrupt if it doesn’t hold certain amount of short-term assets. It’s a harsh financial environment if companies in ‘temporary’ liquidity crisis are just left to go bankrupt and not provided with another chance. The Fast Track Program will lead SMEs to the right track and eventually create healthy financial environment in which SMEs and large companies can grow together.
Yeajin Shim (firstname.lastname@example.org)