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More Gov`t Loans Scheduled for Mid-size Companies

Posted March. 06, 2010 09:24,   


Mid-size companies will be allowed to get loans from the state-run Industrial Bank of Korea, which mainly helps smaller companies, a government official said yesterday.

The companies’ tax rates will also be lower than those for big companies.

The official said, “The goal of these measures is to help smaller companies grow to large corporations,” adding, “The government will release the tax burden on companies of middle standing and provide them with financial assistance.”

To ease the difficulties of mid-sized companies, the state-run bank will offer easier loans to them.

Small and mid-size companies can also take out low-interest loans from the Industrial Bank, which has a variety of low-interest funds from the government and must extend 70 percent of its loans to smaller companies. The corresponding figure for commercial banks is 45 percent.

The bank, however, cannot loan money to a company that has grown and fails to meet the conditions imposed under the basic law on smaller companies.

“Companies of middle standing have difficulty since they cannot use the state-run bank. So the government will take steps to allow them to use the bank as their main creditor,” the official said.

In addition, tax rates will be gradually adjusted to ease the burden on mid-sized companies that could come in the process of growing into larger entities. Mid-size companies are reluctant to grow bigger due to the bigger tax burden and instead conduct spin-offs to get tax breaks.

To help mid-size companies grow larger, the government will impose less tax on them than big companies. Expanding the kinds of corporate taxes for mid-size companies from two to three and lowering minimum tax rates are two such measures under consideration.

Separately, the Federation of Korean Industries yesterday set nurturing mid-size companies as its main task this year. The federation`s Vice Chairman Chung Byeong-cheol said, “The business circle will devise incentives and other assistance measures to help small companies to grow into mid-size companies.”