What is business transition assistance?

Purpose

• It is intended to strengthen corporate competitiveness and upgrade industrial structure by providing fund and consulting to SMEs which are seeking ways to make business transition due to business environment change.

What is 'business transition'?

• It refers to abolition, reduction or maintenance of current business run by SMEs and adding new business or making a transition to new business
  ※ It is different from starting up a business by establishing a separate company.

Types of business transition

Standards for new business

• In the Korean Standard Industrial Classification, business with different subcategory (4 units) (However, exceptions are applicable if the business transition effects are recognized even when the detailed subcategory (5 units) is different), business with category (3 units) for businesses except for manufacturing industry such as service
• Examples of manufacturing industry

  • Manufacture of other electrical converters

    (28119)

  • Manufacture of electrical circuit connectors

    (28122)

• Examples of service business

  • Wholesale of living furniture

    (46431)

  • Wholesale of office furniture and equipment

    (46591)

Requirements for support for business transition and exclusion criteria

Companies approved for business transition

• SMEs that obtained approval for business transition plan among those who meet all of the following requirements.
  ※ Application for loan is possible within 5 years from the approval date of business transition plan.

Companies that have continued their business for more than 3 years as of application date for approval.

• It refers to the period from the business initiation date on the business registration certificate for individual companies and from the corporation establishment registration date on certified copy of corporate registration to the application date for approval.
• However, following business are excluded from application for approval

  Article 4 of the Support for Small and Medium Enterprise Establishment Act

  General entertainment bar business

  Dance and entertainment bar business

  Other entertainment facility management and operation

  Businesses similar to above businesses designated by Decree of Ministry of SMEs and Startups

Companies with 5 or more full-time workers*(Calculated by Enforcement Decree of Labor Standards Act)

• Number of full-time workers divided by 12 as of the last day of each month of the business year immediately preceding the application for approval

If the business to which the company is make a transition is manufacturing or service business (Businesses excluding agriculture, forestry, fishery, mining, manufacturing,
electricity, gas, steam, and waterworks and construction according to the Korean Standard Industry Classification)

• If the company makes a transition to following business, the company is excluded from approval.

  Businesses excluded from Article 4 of the Enforcement Decree of Support for Small and Medium Enterprise Establishment Act ( the items are same as above)

  Same as above

  Businesses excluded from the manual on the business promoted for transition for SMEs

  Business excluded from loan support in the announcement of policy fund loan project

  Business approved for exclusion from support by Minister of SMEs and Startups as they are recognized by the head of support center to be excluded from the support as the business dos does not meet the Article 8(1) of the Enforcement Decree.

Reference : Exclusion from the approval for business transition plan

• Those that fall into one of the following categories
  • 6 months have not been passed from the failure to get approval or approval is cancelled
  • Companies under business suspension or business closure
  • 1 year or more have been passed since the generation of first sales of business planned for business transition as of approval applciation date
    However, if the sales from prototype or products for internal use account for less than 5% of total sales as of approval applciation date, the sales are not regarded as sales.

Companies approved for business restructuring

• SMEs approved* for business restructuring plan according to Article 10 of the Special Act on Corporate Revitalization
  * Loan application can be made within 5 years from the approval date of business restructuring plan.

Major support

Loan support

Eligible applicant (loan application can be made within 5 years from approval date)

• Companies approved for business transition
• Companies approved for business restructuring

Loan scope

• Facility fund
  • Facility Purchase: Funds required for the purchase of machinery and equipment necessary for production, informatization promotion, distribution/logistics, production environment improvement, etc.
  • Business site construction: Land purchase cost and construction funds to secure an own business site
    ※ Land purchase cost is within 6 months of contracting out of planned locations such as business sites and industrial complexes for which building permits have been confirmed. Only if the ball is available
  • Business site purchase: Funds for business site purchase to secure own business site (including auctions and public auctions)
    ※ Funds for securing own business sites are limited to once per company within 3 years
• Working capital
  • capital Expenses to normalize management such as resolving difficulties in business and business transition, expenses to produce products and corporate management

Loan interest rate

• Base rate for policy fund (variable)
  ※ Base rae of 2.15% for the second quarter, 2022

Loan period

• Facility fund : Within 10 years (Mortgage loan with 5-year deferment, credit loan with 4-year deferment)
• Working capital : Within 6 years (Credit loan with collateral based on 3-year deferment)

Loan limit

• Exceptions for loan limit : Up to KRW 10 billion for companies approved for business transition and business restructuring
  * Up to KRW 500 million per year for working capital (up to 1 billion for companies which increased export (the past year’s export is worth US 0.5 million, increase by more than 20%), companies which created more than 10 jobs for the past year, companies which made facility investment of more than KRW 1 billion for the past year (including this time).

Exceptions in tax/commercial law

Exceptions in tax law

• reduction in acquisition tax for real estate acquired for business purposes within 3 years from the date of approval for business conversion in industrial crisis areas (~2024.12.31), 50% reduction in property tax for real estate for conversion business for 5 years
  * Article 75(3) of the Restriction of Special Local Taxation Act

Exceptions in commercial law

• Simplification of procedures under commercial law including merger procedures, stock exchange, business transfer of unlisted companies
  * Chapter 4. 「Special Act on the Promotion of Business Transition of SMEs」

Support procedure

※ If the company is approved for business restructuring after passing the MOTIE Deliberation Committee,
business transition feasibility study (Step 02) and approval for business transition plan (Step 03) are skipped.