Korea to Provide KRW 4.43 Trillion in Policy Financing for SMEs in 2026

South Korea will channel more than KRW 4.4 trillion ($2.97 billion) into policy financing for small and medium-sized enterprises next year, as the government steps up efforts to support innovation, regional growth, and financial stability amid a challenging global environment.
 
The Ministry of SMEs and Startups announced Monday its 2026 SME Policy Financing Plan, outlining a comprehensive funding package designed to support businesses at every stage of growth – from early startups to firms seeking a second chance.
 
Under the plan, a total of KRW 4.4313 trillion will be supplied through a combination of KRW 4.0643 trillion in direct policy loans and KRW 367 billion in interest subsidies on loans issued by private financial institutions. Officials say the approach reflects a broader shift toward what the ministry calls “productive finance” – policy funding that not only cushions companies against risk but also actively enables expansion, innovation, and long-term resilience.
 
Rather than applying a uniform funding model, the government is structuring its support around the life cycle of a business.
 
Startups less than seven years old will receive KRW 1.6 trillion through innovation-focused commercialization funds aimed at helping young companies bring products to market and establish a foothold. Businesses in their growth phase – including exporters and firms investing in smart factories or new growth technologies – will be backed by KRW 1.7 trillion in financing tailored to market expansion and scale-up.
 
Additional funds will be reserved for companies facing operational stress or pursuing a restart. Emergency management stabilization financing of KRW 250 billion will be available for firms hit by temporary difficulties or disasters, while value-chain stabilization funds will support companies struggling with cash flow tied to receivables or production orders.
 
Government officials say the staged approach is meant to ensure that public financing responds to real business needs – supporting startups as they launch, helping growth firms expand, and preventing otherwise viable companies from failing due to short-term shocks.
 
Building on that framework, the government says the real emphasis in 2026 will be on where and how the money is deployed.
 
At the center of the strategy is a sharper focus on regional economies, future industries, and the role of policy finance as a financial backstop in an increasingly volatile trade environment.
 
The Ministry said more than 60 percent of its policy financing – over KRW 2.44 trillion – will be directed to companies located outside the Seoul metropolitan area. Officials describe the move as a deliberate effort to narrow regional gaps and give non-capital regions the financial capacity to innovate, expand, and retain industrial competitiveness. The ministry added that the share of funding allocated to regional firms will continue to rise over time.
 
Innovation-driven sectors are another clear priority. SMEs operating in areas such as artificial intelligence and semiconductors will receive targeted support, with a new KRW 140 billion “AX Sprint Preferred Track” set to launch in 2026. The program is designed to accelerate AI-driven transformation by offering higher loan ceilings, preferential interest rates, and faster screening for eligible firms.
 
Under the new track, companies can access significantly larger loan balances than before, allowing them to move more quickly from development to commercialization. Officials say the initiative is intended to act as early-stage fuel for firms integrating AI into products, production processes, or business models – an area the government views as critical to Korea’s long-term competitiveness.
 
Support for the K-beauty industry will also expand, reflecting its growing role as a core SME export sector. The government plans to double the supply of dedicated K-beauty loans and raise annual per-company limits, while maintaining simplified application procedures that allow firms to apply based solely on purchase-order documentation. The ministry said the approach reflects feedback from companies seeking faster access to working capital amid fluctuating global demand.
 
At the same time, policy finance will continue to serve as a safety net for firms exposed to external shocks. Support for companies affected by protectionist trade measures – previously offered through temporary emergency programs – will be folded into the ministry’s core emergency stabilization funds, ensuring that assistance continues beyond short-term policy cycles.
 
As global trade conditions evolve, the government also plans to strengthen financing for companies looking beyond the domestic market. Funding for overseas subsidiaries will be expanded, and loan limits for firms transitioning from domestic sales to exports will be doubled, giving companies more room to absorb the costs of entering new markets.
 
Beyond expanding the scale and scope of financing, the government is also moving to change how companies actually access it.
 
Officials say the 2026 plan marks a shift away from a provider-driven system toward one designed around the needs and constraints of businesses themselves – aimed at reducing administrative friction while increasing the real-world impact of public funding.
 
To that end, the Ministry will introduce a new digital Policy Financing Navigator early next year. The tool is intended to simplify what many small business owners describe as one of the most daunting parts of government support: figuring out which program applies to them.
 
By entering basic information such as years in operation, export activity, funding purpose, and business status, companies will receive tailored recommendations on the most suitable financing options available. Officials say the system is designed to function as a practical guide – helping firms identify the right support without navigating multiple programs or deciphering complex eligibility rules.
 
The navigator will be available through the Small and Medium Business Corporation’s online platform beginning in January 2026, forming part of a broader push to digitize and streamline policy finance services.
 
For long-established companies facing declining profitability, the ministry plans to go a step further. Before extending new loans, eligible firms will be linked to in-depth diagnostics and consulting services, providing guidance on management restructuring and recovery strategies. The goal, officials say, is to ensure that financing is paired with substantive non-financial support, improving the chances of sustainable turnaround rather than short-term relief.
 
At a structural level, the ministry is also preparing to overhaul the policy financing framework itself. The current system – made up of multiple sub-programs and detailed line items – will be reorganized into a clearer, more intuitive structure that better reflects policy objectives and is easier for applicants to understand. The reorganization plan is expected to be finalized in the first half of next year.
 
The government is also tightening the rules around how policy financing is managed – seeking to balance expanded access with stronger oversight. The ministry said it will reinforce monitoring of financially vulnerable firms and strengthen safeguards against misuse of public funds, as part of a broader effort to boost confidence in the policy financing system.
 
At the core of the approach is an upgraded early-warning system that continuously tracks signs of financial stress among recipient companies. Officials say the system is designed to flag risks before they escalate, allowing the government to intervene early. Where necessary, firms showing signs of distress may receive tailored follow-up support, including repayment deferrals or maturity extensions, to help restore normal operations rather than forcing abrupt exits.
 
At the same time, authorities are moving to crack down on improper use of policy funds. A new “one-strike-out” rule will be introduced for cases of intentional misuse – such as diverting financed facilities for unauthorized purposes. Companies found to have deliberately violated funding conditions will face restrictions on future access to policy loans, signaling a tougher stance on abuse of public financing.
 
Beyond individual cases, the ministry is also targeting systemic risks. Legislative measures are being prepared to prevent improper third-party involvement in the loan application and approval process – practices that officials say have sometimes exposed small businesses to fraud or unfair costs. The proposed framework, expected to be finalized in the first half of next year, will include clearer standards for consulting services and stronger penalties for illegal activities such as false loan guarantees or impersonation of government agencies.
 
While tightening oversight, the government is also adjusting rules to better support high-potential firms. Startups selected for ultra-gap technology projects, as well as companies in priority sectors making large facility investments, will be allowed to receive policy financing more frequently than before. Smaller firms with limited cumulative support will also be eligible for additional assistance, reflecting feedback from businesses that existing limits can constrain growth at critical moments.