One in Four SMEs and Micro-Business Owners "Feel Burdened by Debt Levels"

20% of Businesses Faced Risk of Default in the Past Year
67% Cite "Declining Sales and Operating Profit Deterioration" as Main Reason for Debt

One out of every four small and medium-sized enterprises (SMEs) and micro-business owners is currently feeling burdened by their level of debt.

Response on Debt Burden Level. Korea Federation of SMEs

The Korea Federation of SMEs announced the results of its "Survey on Financial Cost Burdens for SMEs and Micro-Businesses" on July 28, 2026. The survey was conducted between July 7 and 15, before the Bank of Korea’s Monetary Policy Board raised its base interest rate on July 16, and targeted 500 SMEs.

The survey found that 26.4% of companies responded that their current level of debt was burdensome, which is 6.0 percentage points higher than those who responded "not burdensome" (20.4%). By company size, smaller businesses faced heavier financial burdens. Among those who reported feeling a debt burden, 28.1% were micro and small businesses, while 21.1% were mid-sized companies.

Only 1.8% of respondents said they had actually experienced a delay in principal and interest repayments in the past year, but 20.0% said that, while there had been no payment delays, they were at risk of default. This means that one out of every five businesses is struggling with the repayment process. Notably, all companies that had experienced delays were in the micro or small business category.

Business Continuity Period Under Ongoing Debt Burden. Korea Federation of SMEs

When asked about how long they could continue to operate if the current level of debt burden persisted, the most common response was "more than two years" (54.5%). Among micro and small businesses, 27.4% answered "less than one year," which is more than three times higher than the proportion among mid-sized firms (7.7%). This suggests that micro and small businesses may be more heavily impacted if interest rates or macroeconomic conditions worsen.

The main reasons cited for the debt burden were: declining sales and deteriorating operating profits (67.4%), high loan interest rates (37.9%), and rising prices of raw and subsidiary materials (34.8%). To ease debt burdens, the most common response was "cutting costs such as investment and personnel to reduce internal expenses" (58.3%). This was followed by "no measures being taken" (22.0%), "utilizing policy-based finance" (20.5%), and "refinancing with low-interest loans" (15.9%).

Reason for incurring debt burden. Korea Federation of SMEs

The policy considered most necessary to alleviate the debt burden was "expansion of policy-based finance," cited by 58.8% of respondents. This was followed by "loan maturity extensions and repayment deferrals" (52.2%), and the "reintroduction of high interest rate support programs" (43.2%).

Lee Min-kyung, policy chief at the Korea Federation of SMEs, commented, "With the possibility of increased financial costs resulting from the base rate hike, the financial sector should actively make voluntary and cooperative financial efforts, such as offering maturity extensions or repayment deferrals, to support SMEs and micro-businesses." She added, "There is also a need to strengthen the role of policy-based finance as a safety net by expanding its supply and supporting liquidity for vulnerable businesses to ensure that temporary cash flow difficulties do not lead to defaults or insolvency."

This content was produced with the assistance of AI translation services.