Poll: Over 50% of Japan companies receive COVID-19 loans

The Yomiuri Shimbun
An underground mall is quiet amid a state of emergency in Kita Ward, Osaka.

More than 50% of companies surveyed by The Yomiuri Shimbun and Teikoku Databank Ltd. had used coronavirus-related loan programs as of February.

Of those who received loans, 9% were worried they might not be able to repay them, highlighting the difficulties involved in supporting companies amid the pandemic.

The coronavirus-related loan programs are based on a public system for supporting companies facing deteriorating business conditions due to the spread of the new coronavirus. Many small and medium-sized companies have received effectively interest-free loans without having to provide collateral.

Large companies can receive subordinated loans, which are repaid only after other debts have been satisfied in the event of bankruptcy or other problems.

With these loan programs, the volume of private-sector debt has exceeded pre-pandemic levels.

Paying labor costs

Out of the 11,562 companies that responded to the survey, 6,084, or 52.6%, said they had used the coronavirus-related loan programs. If companies that had not borrowed money through these programs but planned to do so are included, the figure increases to 53.8%.

Asked what they used the borrowed money for, the largest group — at 50.1% — said they paid labor costs. This was followed by the purchase of raw materials or products at 43.4%, repairing and updating facilities at 25.3%, and pursuing new capital investments and business expansion at 18.5%. Multiple answers were allowed.

Communication costs have increased due to remote work, and 257 companies, or 4.2%, said they borrowed money to pay the higher expenses.

In contrast, 4,763 companies, or 41.2%, had not taken out coronavirus-related loans, mainly because they did not want to increase their debt.

Hospitality industry

Of the 6,084 companies that received COVID-19 loans, only 120 had completed repayment.

Among those that had not repaid their debt, 4,846, or 81.3%, said they would be able to complete repayment in accordance with the terms of the loans. A total of 538 companies, or 9%, expressed concerns such as difficulty repaying a loan unless the terms were relaxed, for example by reducing the interest or the amount to be repaid, or granting a grace period.

The ryokan and hotel industry has been hit hard by the pandemic, and one in five respondents in this field said they were having difficulty repaying their debt. If they cannot pay back the money, it will have a significant impact on regional economies.

Companies divided in terms of financing

The survey also found that the coronavirus pandemic divided companies in terms of financing.

By business type, about 70% of the respondents in entertainment services, the ryokan and hotel industry, and the restaurant business took out COVID-19 loans. This is compared to about 20% in the agriculture, forestry and fisheries industry, which is believed to have enjoyed stable sales partly due to stay-at-home demand.

In manufacturing and construction, where the impact of the pandemic was relatively limited, many companies took out such loans as a precautionary measure. An Osaka-based construction company said: “We borrowed money just in case. We haven’t used it, so we’ll just return it.”

Russia’s invasion of Ukraine has caused the price of resources such as crude oil and grains to surge, which has led to growing concerns that this will be an additional factor in decreasing corporate earnings.

Tomohiro Kaminishi, head of Teikoku Databank’s information department, said: “The data shown in the survey gives us concern about how difficult financing is for many companies. With the future increasingly uncertain, it’s necessary to discuss support measures to get companies that have been seriously affected back on track.”

The survey was conducted online on Feb. 14-28. The survey covered 24,213 companies of various sizes across the nation, and received answers from 11,562 companies, or 47.8%.