Episode 46: Funding Loan
As the car stopped in front of the bank building, Dong-geun hesitated as he was about to get out.
“This is a bank, isn’t it? Why are we here?”
“To inquire about a loan. If you’re going to secure business funds, you have to start with the bank. What are you planning to do without capital?”
“No, I never intended to do something this big, and I don’t have the capability. Why come to a scary place like a bank? They say if you can’t repay the loan, you’ll end up a beggar. I don’t like it.”
“Who said you’re borrowing money? What collateral do you have other than your body?”
“I know a thing or two. They say if you borrow money and can’t repay it, you’ll end up on a deep-sea fishing boat. I can’t stand crab fishing or anything like that.”
As Dong-geun displayed his fear, Lee Chang-jin laughed heartily.
“You’ve heard all sorts of things. Do you think I’d sell you off? Just watch quietly. Put the documents in the bag.”
As Lee Chang-jin confidently approached the bank entrance, the anxious Dong-geun followed, holding the document bag politely. The bank employee at the front desk greeted them respectfully.
“What brings you here today, Mr. Lee?”
“I have an appointment. Is the branch manager in?”
“Ah, yes. He is. I’ll guide you to the branch manager’s office.”
Inside the branch manager’s office, there was an orchid and a plaque proudly displayed, indicating they had the best performance in the last quarter. Lee Myung-chun, who had gained some weight and looked more prosperous, warmly welcomed Lee Chang-jin.
“Oh, Mr. Lee, how long has it been?”
“About six months? It’s been a while since I came in person. Ye has been coming back and forth for bank matters, but it’s really nice to see you.”
“Haha, I feel the same. Ah, I heard the news. I heard your business is doing very well these days. Thanks to you, I also received an award for excellent performance at the headquarters and gained some face at home.”
From Myung-chun’s perspective, Chang-jin was almost like a benefactor. The dramatic improvement in the performance of the Myeong-dong branch, which was on the verge of being shut down, was largely thanks to Chang-jin. Using the success of Daese Group as a stepping stone, the Myeong-dong branch achieved the highest performance among all branches in the last quarter.
“You’re here for the livestock promotion fund loan inquiry you mentioned before? I was waiting for your call. Please, come this way…”
As Chang-jin gestured, Dong-geun took out the document envelope he had brought.
“Here is the business plan I mentioned. I thought it would be good for you to take a look, so I brought it.”
Myung-chun put on his glasses and examined the business plan. As the silence continued, one of the female employees brought over warm coffee. Dong-geun watched the scene without making a sound while the review continued.
After reading the documents for a while, Myung-chun nodded with satisfaction.
“Hmm… It’s quite good. You’ve prepared a lot. So, will you be personally overseeing this business?”
“No, I’m not familiar with agriculture and livestock, so the actual work will be handled by an expert. This person will be in charge of the practical aspects of agriculture and livestock. In fact, he wrote this plan.”
“Hello. My name is Lee Dong-geun.”
Myung-chun glanced at Dong-geun with interest.
“Ah, impressive. It’s rare for someone to bring such a well-prepared business plan when coming for a loan. So, what kind of organization are you planning to set up?”
“We plan to form a cooperative.”
“Good idea. How many members will the cooperative have? There must be at least three members.”
“Myself, Deok-gu hyung, Gwang-deok, and Bok-soon. So, four members.”
“So, there will be four people handling the poultry operations.”
“Then, there should be no problem with the cooperative formation requirements. For the livestock promotion fund, having qualified members gives you additional points in the loan condition review. Do you have any certified personnel?”
“Yes, Dong-geun here recently obtained a chick sexer certification.”
“But it’s a first-class certification, not an advanced one. Is that sufficient?”
“For the loan, only the possession of a certification matters, not the grade. If three or more members are certified, you get tax benefits. The loan terms also include a special interest rate with a 10-year grace period and 20 years for repayment.”
“Ah, I see. Besides me, there are three more. The other members we plan to register are all first-class certified.”
“Hmm. Then there’s no issue. The cooperative member conditions are met, and for the other three practical workers, just have them sign the membership form and submit it later. But we need to list the address of the livestock facility. Do you have the site secured, or at least planned?”
“We’re considering the Maljukgori Flower Complex area.”
“Oh, you already have a planned site. If you attach the land contract or usage consent, it will be easier to pass the review. However, there are quite a few required documents.”
“What documents are needed?”
“An application form, the cooperative’s articles of association, member confirmation letters, and a copy of the land registry are necessary. The cooperative’s corporate seal is also required. Due to the increase in fraud, the requirements for the livestock promotion fund have become more complex.”
“Hmm… In that case, there shouldn’t be any problems on our end, right?”
“Of course. Borrowing from the livestock promotion fund means the loan interest is less than half the market rate. Anyone who understands the situation would be tempted. But, surprisingly, farmers are against it. Despite the promotion, no one borrows. They are overly cautious. Nowadays, some people take out large loans under the pretext of livestock projects and then use the money for high-interest loans.”
In the 1970s, as livestock promotion policies were implemented, pig and chicken farming developed into specialized industries. Driven by the demands of the times, the Livestock Promotion Fund was established in 1974 under Article 25 of the Korea Racing Authority Act. Although it was launched ambitiously, it was still in the early stages and had many shortcomings.
Nodding in agreement, Chang-jin sympathized.
“That sounds troublesome.”
“Yes, the problem is that the cooperative or the central agricultural cooperative can’t filter these people individually. So, it’s only the commercial banks like us that suffer. The banks bear the loan responsibility, while the fund distribution is handled by them. It’s a mess.”
“That sounds like a lot of hassle.”
After a moment, feeling he had said too much, branch manager Myung-chun composed himself.
“I got a bit carried away… I apologize. Anyway, it’s a relief that you have a planned site. However, the maximum loan amount for land purchase is 100 million won, and the loan-to-value ratio is capped at 70%. The rest must be self-financed.”
“We anticipated that. We plan to use our Yeongcheon factory site as collateral to get a credit loan from the SME policy fund for the remaining 30%. Is that possible?”
“That shouldn’t be too difficult. Your company’s credit rating must have improved considerably with the patent for the vacuum dryer. However, the interest rate is almost twice as high as the livestock promotion fund. Is that okay?”
“It’s fine. Please go ahead.”
Expecting immediate returns from an investment just because the business outlook is good is foolish. In economic terms, there’s a period known as the Death Valley, where losses are inevitable before profits can be realized.
The poultry farm will also take time to stabilize and start generating profits. However, by using bank loans to proceed with the business, the operating profits from the poultry farm can offset all costs. This means that from Chang-jin’s perspective, he can push forward with the business without spending a single won. After reviewing the documents, Myung-chun asked again.
“Out of the total capital of 30 million won, Dong-geun as the cooperative leader holds 10%, Daese Group holds 40%, and you, Mr. Lee, hold 45%, correct?”
“Yes, that’s correct.”
“What about the remaining 5%?”
“We plan to discuss that with the cooperative members and decide gradually. We’ll also appoint an auditor later, so we’ll address it then. Please wait a moment.”
“Understood. We’ll review the documents. We’ll also provide a list of additional documents needed for the funding support. Let’s start the cooperative formation process with our branch’s legal advisor. I’ll also coordinate with the Ministry of Agriculture and the Livestock Promotion Fund Secretariat in advance.”
“Thank you. Please take care of it.”
“No, I should be thanking you. As long as you continue to use our bank, that’s more than enough.”
After discussing the loan, Chang-jin left the bank. Dong-geun, looking worried, asked.
“The scale of this is getting bigger. An investment of 100 million won is a lot… I’m feeling the pressure.”
“Are you unsure? If you’re not confident, you can back out now.”
“No, absolutely not. You’ve helped me so much. Backing out now is out of the question.”
Seeing Dong-geun’s firm resolve, Chang-jin checked his watch and spoke again.
“We still have some time. Let’s go to one more place.”
“Where?”
“Didn’t you hear earlier? The livestock site is still undecided. We need to find some land.”
With that, Chang-jin drove quickly. He headed to a bakery in Myeong-dong called ‘Montmartre’. In front of the bakery, there was a life-sized standee of a model dressed as a patissier, smiling while pointing at a cake. Dong-geun asked, bewildered.
“You said we were going to find land, so why are we here?”
“You need information to buy land. You don’t just go and buy it blindly. Stop talking and come in.”
As they entered, a little bell chimed. Inside, the shop was filled with a fragrant, sweet smell. A patissier answered in a high-pitched voice, hearing the bell.
“Yes, just a moment. I’ll be right out!”
The patissier, who was also the owner of the bakery, was Yeong-mi. She was in the middle of baking cookies, wearing oven mitts. Seeing Chang-jin, Yeong-mi greeted him warmly.
“Oh, Chang-jin! Long time no see. You look even more handsome.”
“Thank you. You look even more beautiful, Yeong-mi.”
“Hoho, I’ve gotten paler because I’ve been working all the time without seeing the sun. I wish I could go to the beach before the peak season, but I’m too busy. By the way, who is this beside you? He looks like you. Are you brothers?”
“Oh, he’s my cousin. Say hello. This is the bakery owner, Seo Yeong-mi.”
“Hello. I’m Lee Dong-geun.”
“Oh, how cute. Good genes run in the family.”
Dong-geun blushed at the unexpected compliment. Sensing the atmosphere, Chang-jin changed the subject.
“Has Seon-ah arrived? She was supposed to come.”
“She’s been waiting for 30 minutes already. Go ahead and see her.”
Entering the bakery, they saw Jin Seon-ah sitting by the window, elegantly sipping coffee with a plate of cake in front of her.
- To be continued in Episode 47 -
