A few pedestrians walk along at a street in Jongno, Seoul, Dec. 16. Yonhap

Kim, an owner of a coffee house in Seoul, said he recently filed a form with KBIZ, a group that represents the interests of over 8 million small and medium-sized businesses, seeking a payout due to the closure of his business.

“I couldn't see myself going on anymore,” he said. “Not as many come to have coffee or dessert. It's been months that I thought about being done with this. Now I have no choice, since I can no longer make ends meet.”

Drinking coffee at a coffee shop has become a luxury to many, according to Kim, since cheaper choices are everywhere.

“Paying well over 5,000 won ($3.4) for a cup of coffee is obviously something many can live without. What I sell is not a daily necessity. People cut back on having coffee when they feel the pinch of the high living costs. But then what are small businesses like me supposed to do?”

A woman who operates a nail shop in Gyeonggi Province shared a similar experience.

Nowadays, consumers can easily purchase a wide range of nail polish, nail care products, she said, and even equipment once restricted to professionals ㅡ all available online.

“It seems like all they need to do is to search for these products. Adding a personal touch, along with attention to detail have long been a point of pride for me. But many consumers can learn how to do that themselves after having their nails done at a shop a few times. Not as many come to the shop for me to keep it open.”

These are just two examples of the many small businesses that have sought assistance from KBIZ, widely known as the "yellow umbrella." Established in 2007, the social safety net program offers financial support when small business owners close their businesses. Participants pay monthly dues over time, with the payout amount determined by the duration and size of their contributions to the program.

The program registered a payout of over 1.3 trillion won this year, an all-time high and a 10.1 percent year-on-year increase.

The amount of credit guarantee-mediated loan repayments also surged.

According to Rep. Oh Sae-hee of the main opposition Democratic Party of Korea, the amount of loans repaid by credit guarantees for small businesses came to 1.71 trillion won in 2023, up from 507.6 billion won in 2022. As of October, the figure came to 2.06 trillion won.

“More small businesses are likely to close down, given the high hourly minimum wage and a spike in input material costs, compounded further by sustained high borrowing costs,” an industry official said.

The National Tax Service said the number of business shutdowns reached an all-time high of 986,487 in 2023.

According to a survey of 500 small and medium-sized businesses conducted by KBIZ from Dec. 3 to Dec. 12, almost half, or 47.2 percent, said this year's financing conditions worsened compared to last year, 15.5 percentage points higher than 31.7 percent last year.