Internet Banks Lower Barriers for Business Loan Refinancing

Internet banks are making it easier for small business owners to refinance loans by increasing limits and expanding product offerings. Since the introduction of a refinancing service for small business credit loans in March, which was led by financial authorities, the performance has fallen short of expectations due to limited eligibility. In response, banks are enhancing their product competitiveness to capture refinancing demand.

According to the financial sector on the 19th, Toss Bank raised the maximum limit for its refinancing product for nine professional business owners, including doctors, pharmacists, and lawyers, from 500 million won to 700 million won as of the 16th. A Toss Bank representative stated, "This change reflects requests from professional business customers who want to refinance their existing loans all at once. We have broadened the options for customers who found it difficult to refinance under the previous limit, allowing them to switch to better terms."

KakaoBank plans to expand its refinancing loan products for small business owners in November. Previously, it only supported switching from other banks' small business credit loans to its own credit loans. However, it will soon introduce a product that allows conversion from other banks' small business loans to its own real estate secured loans. This aims to diversify refinancing options for small business owners, moving beyond just credit loans.

The efforts by internet banks to enhance their product competitiveness come amid disappointing usage rates of the small business credit loan refinancing service. The Financial Services Commission introduced this service in March to alleviate the interest burden on small business owners, but actual usage has not met expectations.

According to data submitted by the office of Park Seong-hoon, a member of the National Assembly, to the Financial Services Commission, from March 18 to September 30, there were only 1,339 users of the service, with a new loan amounting to 125.3 billion won. This is only 12.5% of the expected loan transfer volume of 1 trillion won. However, the average interest rate for borrowers using the service decreased by 1.04 percentage points. The limited eligibility, which restricts access to credit loans for small business owners with working capital under 1 billion won from first-tier financial institutions, is cited as a reason for the poor performance.

In this context, it remains to be seen whether the increased loan limits and expanded products from internet banks will capture refinancing demand that was previously unaddressed. Internet banks, facing constraints on loan growth due to household loan regulations, have no choice but to focus on expanding small business loans.

A financial sector representative noted, "If the scope of refinancing expands to include guarantees and secured loans, and more financial companies participate, the small business loan refinancing market could become more active."