Finance

How do the three government-affiliated financial institutions support Corona-stricken companies?

Government-affiliated financial institutions provide loans, investments, and guarantees for projects that are difficult for private financial institutions to deal with, even though they have financial needs with high public interest. Meanwhile, the presence of government-affiliated financial institutions is increasing due to the spread of the new coronavirus infection (hereinafter referred to as corona sickness), which has brought about a rapid increase in panic-class financial needs.

In this article, we will introduce the “activity” of three government-affiliated financial institutions: Japan Finance Corporation, Development Bank of Japan, and The Shoko Chukin Bank.

Japan Finance Corporation Supports Small and Medium-sized Enterprises Without Interest and Collateral

Japan Finance Corporation is a government-affiliated financial institution that mainly provides business financing to small and medium-sized enterprises, small businesses, and agriculture, forestry, and fisheries.

By the end of December 2020, Japan Finance Corporation’s measures against corona mortgages had reached approximately 740,000 virtually interest-free and unsecured loans, of which approximately half were new loans. It shows that the number of businesses that have decided to rely on Japan Finance Corporation for the first time in the face of the unprecedented economic crisis of the Corona Depression is increasing.

The president of Japan Finance Corporation also self-evaluated in a media interview that “private financial institutions supported existing lenders and the Japan Finance Corporation was able to take on new roles.(*1).

(※1)”Three government-affiliated organizations support companies in predicament” Nihon Keizai Shimbun

Specific Support Measures of JFC

Let’s take a look at some specific support measures of Japan Finance Corporation(*2).

The “New Coronavirus Infectious Diseases Special Loan” is an expansion of the conventional virtually interest-free and unsecured loan.

First, we increased the maximum loan amount for small and medium-sized enterprises from 200 million yen to 300 million yen. In addition, we used to use the rate of decrease in sales in the last month as the standard for lending, but we have eased it to the rate of decrease in the last two weeks or more. This has made it possible to speedily support small and medium-sized enterprises whose sales have fallen sharply.

“Capital subordinated loan” is a loan of up to 720 million yen per company to small and medium-sized enterprises that are funded by an investment fund funded by the Organization for Small & Medium Enterprises and Regional Innovation. The loan interest rate is as low as 0.5{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} for the first three years.

Subordinated loans have a low repayment order (because they are subordinated), so there is a high possibility that they will not be repaid when the loaned company goes bankrupt. Can be considered.

Regarding the significance of using the subordinated loan method as a countermeasure against corona illness, the Japan Finance Corporation states that “when private financial institutions cannot take risks, the public corporation supports small and medium-sized enterprises with subordinated loans.”

(※2)To all businesses affected by the new coronavirus infection

Development Bank of Japan is future-oriented and provides more support than Lehman

Development Bank of Japan is a government-affiliated financial institution that provides long-term support for large and medium-sized companies using financial technologies such as investment, financing, and debt guarantee.

The Development Bank of Japan proactively provided crisis response loans due to the corona disaster, and the total loan amount for the six months to September 2020 reached 2 trillion yen (* 3). This is 1.4 times the amount during the 2008 Lehman shock.

The president of the Development Bank of Japan emphasized that he faced this difficult situation with a sense of crisis, saying, “In principle, we have made it easier to distribute funds through co-financing with private financial institutions”(*4).

Development Bank of Japan New Corona “Crisis Response Loan” Over 2 trillion yen in half a year

Looking at After Corona

And the Development Bank of Japan is also looking at after-corona.

Corona is also an opportunity for companies to create new businesses. It is said that some companies that consult with the Development Bank of Japan are seeking funds to transform their business models.

We would like to introduce “Crisis Response for Medium-sized and Large Enterprises” as a concrete countermeasure against corona damage that the Development Bank of Japan is working on(*5).

Unlimited loans to mid-sized and large companies whose sales in the last month or average sales in the last 6 months have decreased by more than 5{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} compared to the same period of any of the previous 3 years To do. In addition, we will lend to mid-sized companies for the first three years at a 0.5{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} lower than the normal interest rate. And even in this crisis response for medium-sized and large companies, some subordinated loans are used.

(※4)Three government-affiliated organizations support companies in predicament (※5)To all businesses affected by the new coronavirus infection

The Shoko Chukin Bank implements an interest rate of 0{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} in some areas

The Shoko Chukin Bank is a government-affiliated financial institution that provides comprehensive management support financial services to SMEs and SMEs.

The Shoko Chukin Bank has set up a “special consultation desk for new coronavirus infections” as a countermeasure against corona sickness and accepts consultations from the owners of small and medium-sized enterprises.

The Shoko Chukin Bank also provides a special loan called “Special Loan for Coronavirus Infectious Diseases”. We will provide working capital loans or equipment financing of up to 2 billion yen to small and medium-sized enterprises whose sales have decreased by 5{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} or more due to corona damage (* 6). In addition, if certain conditions are met, the interest rate for the first three years will be reduced to 0{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7}, up to a limit of 300 million yen.

Due to these encouraging contents, the crisis response loan at the Shoko Chukin Bank’s Corona Stigma reached about 2 trillion yen.

(※6) Crisis response work for the Shoko Chukin Bank

Summary – Increasing Presence as a Safety Net

We introduced the measures against corona sickness of three government-affiliated financial institutions.

Many companies are forced to raise funds due to the coronavirus. The economic crisis caused by the Corona Depression is occurring at the same time on a global scale, so companies have no escape. Also, since the perpetrators of this economic crisis are “invisible enemies,” no fundamental solution can be found immediately.

As for corona countermeasures, the government, government agencies, and the Bank of Japan have come up with support measures at full capacity, and government-affiliated financial institutions will be the execution unit. Companies want to make effective use of this strong safety net to formulate strategies with an eye on immediate measures and after-corona.