Korea's New Startup Guarantee Lets In Grade-4 Founders, About 60 Firms a Year

One Credit Grade Separates It From the Existing Product

Korea Credit Guarantee Fund (KODIT) and IBK Industrial Bank launched the Startup Build-Up Program on September 21, a guarantee product for very young startups. It was the first item on the agenda of the 14th Policy Finance Support Council, which the Financial Services Commission convened the same day. It covers companies in "new growth engine" sectors that are no more than three years old. The agenda paper lists those sectors as semiconductors and displays, AI, energy, bio, manufacturing and mobility, materials and components, and ICT and digital, among others.

The product makes sense only next to the one it sits beside. KODIT already offers Easy-Start, a guarantee for companies under three years old, which requires the founder's personal credit grade (CBR) to be 3 or better and a growth-potential score of at least 50. The Build-Up Program takes companies that fall short of that. A founder at credit grade 4 with a score of 60 or more can get a guarantee of up to 100 million won, or up to 50 million won with a score between 50 and 60. A founder at grade 3 or better whose company scores between 45 and 50 can also get up to 50 million won.

The first-year guarantee fee is fixed at 1.0%, and the guarantee covers 100% of the loan. IBK cuts the interest rate on the first loan made against it by up to 1.2 percentage points. The agenda paper says limits are set with more weight on growth potential than on the founder's credit. Even so, the first screen at the door is still the founder's personal credit grade. IBK recommends candidate companies, and firms that KODIT or IBK has invested in or incubated get bonus points.

The One-Year Review Decides the Second Tranche and the Deferral

After a year, KODIT re-rates the founder's credit and the company's growth potential. A company that reaches grade 3 and a score of 50, the same bar as Easy-Start, can have its limit raised to 200 million won including the first year's guarantee. The second-year fee drops to 0.7%, and IBK's rate discount widens to as much as 1.5 percentage points.

Companies that pass with especially strong growth prospects can also opt for an investment-option guarantee. Under that structure, according to the agenda paper, the existing guarantee can later be converted into equity when the company needs more capital, and KODIT can then extend further guarantees. Once the guarantee converts, KODIT becomes a shareholder. The paper also says conversion of the remaining guarantee balance will be considered when a company raises money from partner institutions. A founder heading into a later round may find a policy lender already on the cap table.

Principal repayment can be pushed out too. If nothing goes wrong during the one-year second-stage guarantee, the company can defer principal installments for the next three years. The agenda paper adds up two years of support and three years of deferral and describes it as up to five years without repaying principal. Graduates get five bonus points when they apply for KODIT's higher-tier guarantees. For Little Penguin, a guarantee of up to 2 billion won for companies under seven years old, the initial limit rises from 50% to 60% of the final limit.

About 60 Companies and 10 Billion Won a Year

The scale is modest. The agenda paper plans roughly 10 billion won of new funding a year for about 60 companies. KODIT based that on the credit profile of its current startup borrowers and the average of 160 million won it provides to early-stage companies, and says it will adjust supply to demand.

IBK's figure looks different. According to Financial News, IBK launched a dedicated loan product called IBK Step-Up Loan worth 300 billion won under the agreement, for early-stage companies holding guarantees issued under it. The announcements do not explain how a 10-billion-won guarantee plan relates to a 300-billion-won loan product. A team preparing to apply is better off planning around the 60 slots a year than around the larger number.

The demand is real. The agenda paper cites a June 2023 study by the Korea Institute for Industrial Economics and Trade finding that government channels such as policy loans and guaranteed bank loans are the most common way ordinary startups fund their early stage, at 62.1%. In the SME ministry's January 2026 survey of startups under seven years old, difficulty raising money was the most cited obstacle to starting a business, at 53.7%.

The Same Meeting Removed Another Personal Guarantee

The council also agreed to scrap joint and several guarantees on SME P-CBOs, securitized bonds in which a special-purpose company buys individual companies' bonds and issues asset-backed securities on top of them. Korea abolished personal joint guarantees on public institutions' SME lending in April 2018, but P-CBOs at KODIT and the Korea Technology Finance Corporation still carried them. The commission expects the change to free about 1.9 trillion won of P-CBOs a year from those guarantees, based on 2025 volumes. At the end of 2025, about 3,000 companies had some 4.5 trillion won outstanding.

The exemption has a condition attached. The two guarantors will introduce a responsible-management review covering the actual manager's control and creditworthiness as well as litigation and criminal records, and only companies that pass can issue without a joint guarantee. Companies that fail will be nudged to pay down a set share, for example 10% to 20%, at regular intervals, with the chance to be reviewed again.