The state-run Korea Development Bank is actively promoting technology financing in a bid to keep up with the government’s latest efforts to boost high-tech start-ups that have trouble securing funds.

Technology financing involves loans secured on a borrower’s technology. Despite South Korea’s reputation as an IT powerhouse, start-ups still find it difficult to raise capital.

To provide better support, the Financial Services Commission, the local financial watchdog, announced a plan in April to set up a technology credit assessment system designed to offer a wider range of loan options for start-ups. The government also assigned the Korea Enterprise Data and Korea Technology Finance Corp. as Tech Credit Bureaus in charge of issuing credit ratings to start-ups based on their technology, their patents and market data. 

KDB said it dispatched employees to the Tech Credit Bureaus to share the bank’s technology financing expertise. The bank also is also offering fresh loans worth some 50 billion won ($49 million) to firms that received favorable ratings from the bureaus. The loans will be given to firms that were established less than seven years ago, and would not require collateral or credit guarantees.

Under the program, the bank has so far offered 1.3 billion won in loans to three local start-ups including CIS Company.

CIS Company is a firm that successfully localized the necessary technology for producing aluminum for semiconductors and liquid crystal displays. However, the company struggled to secure loans due to lackluster sales and the lack of a guarantor.

Thanks to the latest technology credit assessment system that issued it with a strong rating, the company in July was able to take out a 300 million won loan from KDB at an interest rate of 4.9 percent.

“We could not take out loans because we lacked the collateral. But thanks to the technology credit assessment system, we were able to secure them from KDB,” said Lee Sung-ho, chief executive of CIS Company.

With the financial boost, the firm expects its sales to soar by fivefold to 2 billion won this year from 400 million won in 2013.

At a technology financing seminar earlier this month, FSC chairman Shin Je-yoon said, “The government will provide big incentives for banks that are committed to technology financing. We will also continue to push ahead with overhauling the institutional infrastructure, expanding the number of specialists and improving evaluation models.”

To help technology financing take root, KDB believes three-way cooperation between the Tech Credit Bureau, financial organizations and the government is imperative.

By Shin Ji-hye (shinjh@heraldcorp.com)