The Korea Credit Guarantee Fund's default rate on general guarantees is projected to reach 4.3% this year, up 0.6 percentage point from a year earlier and above 4% for the first time since 2015. The fund expanded guarantees during the COVID-19 pandemic as economic shocks multiplied, but weak domestic demand, higher interest rates, U.S. tariffs and rising oil and raw-material costs linked to the war in the Middle East are now weighing on smaller companies' repayment capacity. A loan is classified as impaired after one month of missed payments, and the fund makes a subrogated payment to the bank if the loan remains unresolved for roughly three additional months. Subrogated payments on general guarantees more than doubled to 2.44 trillion won last year from 1.15 trillion won in 2022, while the payment ratio rose to 3.8% from 1.9%. The fund expects provisions to increase by 233.9 billion won through 2028 and may reduce guarantee supply, with its 2030 support target set at 73.91 trillion won, below this year's 77.98 trillion won plan. It is targeting a default rate of about 3.9% this year and 3.8% in 2027 through tighter risk management. Rep. Seo Il-jun warned that worsening fund soundness could create a funding squeeze for small businesses and venture companies.