One of the aspirations the Park Geun-hye administration wants to achieve for its ‘Three-year Economic Plan’ is the innovation of financial sector – ‘Creative Finance’. For those of you who want to know more about what is Technology Finance, Frank came to write an article to explain about Technology Finance and what kind of financial policies are there to promote Technology Finance.
Part 1: What is Technology Finance and the role of TCB?
The key steps for financial innovation during the Park Geun-hye administration are easing economic regulations and encouraging technology finance. To meet up with this aim, the FSC announced its financial policy direction for 2014 in pursuit of Korea’s financial service industry more trustworthy and globally competitive. Financial Policy Direction for 2014 includes a key point which addresses to establish a technology credit bureau and technology information database. “The TDB will integrate technology information scattered around different institutions and process the data to be shared and used in technology evaluation or loan application reviews. The TCB and TDB will enable small tech firms to receive loans from banks with their innovative ideas or technology as collateral” the contents refer to.
Technology Finance is an innovative policy which provides loan based on technology assessment results; the existing system used to support fund only by the company’s financial state. Technology finance makes investments to companies by assessing their potential growth based on the key technologies they possess. It targets to encourage small and medium-sized companies and venture start-up companies to commercialize their innovative technology at global market by financial supports.
So far, the establishment of TCB has been successful. At the end of September, TCB provided total 3,187 loans based on technology assessment which is about 1.8 trillion won. Its initial goal was to give out 7,500 loans; it is expected to achieve by the end of the year. Banks came across to cooperate with the FSC that they voluntarily gave out loans based on technology assessment results; the amount of technology credit loan provided by banks account for 40% of the total, which is huge.
Part 2: How can we apply for technology finance loan?
The steps to getting financial support consist of three parts – online application, technology assessment and financial evaluation. Technology Finance operates website. With its motto, tech innovation, it receives application online. The process is like the followings. Firstly, it is mandatory for the applicants to arrange consultation in advance to talk about business. The applicants will receive a form that indicates that the consultation session is confirmed and sign it. Then, go to the website. Download the materials and fill out the application form. Thirdly, go to the website www.tf.or.kr, join as a member then send application form online and attach appropriate documents. Then the application is over.
After the application is done, you still need to go through two more steps. For technology assessment, criteria consist of technology management in terms of research and development capacity, technical consideration, marketability and business value analysis on overall technology the company possesses. This process normally costs about 2,000-4,000 USD and the government supports about 75~90% of the total cost; the financial burden of companies is eased. Technology assessment will be finished with giving out KTRS (Kibo Technology Rating System). The evaluation grade is given by considering the level of technology (examines the business potential) and the level of risk (calculates possibility of fraught) based on the current level of technology the company has.
Part 3: Case study of Technology Finance – Woori Bank
In August 2014, Woori Bank launched technology finance service called, ‘Woori innovation loan for outstanding technology enterprise’. The targeted consumers are the companies whose credit level is BBB0 or above. To speak it, it means that the company has good level of technology, low level of business failure but that circumstances are susceptible to corporate changes in the future. For the small companies with TCB’s level T6 or above, Woori Bank offers enlarged monetary limit amount and special discount on loan interest, to the lowest of 3.23% of annual interest rate. Even commission fees related with technology assessment will be covered by the bank.
Woori Bank is the first financial company among the others which presented E-commerce guarantee services agreed with TCB; the services are to support online group purchase of small companies. It is not to mention that there are many other banks which offer supportive services for middle and small-sized companies with high level of technology. The purpose of Technology Finance is to support small-in-size yet competitive companies with innovative technology. The traditional concept of loan was rated only based on the financial state of a company. However, with the introduction of Technology Finance, the opportunities to receive financial supports and apply for loan will be covered by variety scope including the financially weak but technically competitive companies. Frank is looking forwards to seeing other Technology Finance policies.