2025 Small Business Closure Shock: 4 in 10 Shut Down Before 3 Years—How Much Debt?

 

2025 Small Business Closure Shock: 4 in 10 Shut Down Before 3 Years—How Much Debt?

#SmallBusinessClosure #Under3Years #DebtAmount #ProfitDecline #KBIZ

Did you know 4 out of 10 small businesses in South Korea close before hitting 3 years?

The Korea Federation of SMEs (KBIZ) released its “2025 Small Business Closure Survey” on March 19, digging into 820 businesses that shut down since 2021. The average lifespan? Just 6.5 years!

By sector, manufacturing lasted longest at 8.4 years, followed by services (6.7 years), wholesale/retail (6.6 years), and hospitality/food (5.1 years).

Short-term closures under 3 years hit 39.9%. That’s 5.6% gone in under a year and 34.3% between 1-3 years. Only 22.3% made it past 10 years.

Top reason for closure? “Profit decline and sluggish sales” (86.7%)! Blame domestic demand drop (52.2%), rising labor costs (49.4%), raw material price hikes (46.0%), and fixed cost increases like rent (44.6%).

Hospitality/food businesses groaned under delivery and booking app fees (35.6%), far above the average (16.3%).

Debt at closure averaged 102.36 million won ($102,360), with closure costs at 21.88 million won ($21,880). Manufacturing racked up 144.41 million won in debt and 38.59 million won in costs—way higher than hospitality’s 90.46 million and 12.19 million.

Breakdown of costs? Demolition (5.18M), restoration (3.79M), severance (5.63M), and taxes (4.2M).

A whopping 78.2% skipped government aid like Hope Return Package—66.9% didn’t know about it, and 21.4% found it too tricky.

What’s needed? Loan repayment grace (52.6%), closure cost support (51.0%), and career help (46.6%) topped the list.

For jobs, they want better incentives (36.4%) and local opportunities (27.2%). For restarting, it’s funding (44.5%) and debt relief (22.9%).

KBIZ suggests, “Boost retraining and job incentives to ease competition and fill manufacturing gaps.” Will help arrive soon?