More than 970,000 businesses, including those in the food and service sectors, closed down last year, with the closure rate reaching 9 percent, according to data.
Of those who closed their businesses, 68.5 percent held debt, with an average debt amount of 85.31 million won.
The most frequently cited reason for deciding to close was "worsening profitability and sluggish sales" due to a decline in customers.
The Ministry of SMEs and Startups announced these findings today (June 30) in its report titled "Statistics on Closed Businesses and Survey on Closed Small Business Owners."
The survey consisted of "quantitative statistics," which measured the scale of closures by analyzing the National Tax Service's status of closed businesses, and "qualitative statistics," which analyzed the "inner stories" of 1,500 closed small business owners through surveys. According to the survey, 976,000 businesses closed last year, a decrease of 32,000 from the previous year, and the closure rate fell by 0.4 percentage points to 8.64 percent.
Closures in the six major small business sectors—manufacturing, wholesale, retail, food service, lodging, and services—totaled 751,000, with a closure rate of 11.08 percent, significantly higher than the overall average.
Small business owners account for 77 percent of closed businesses, meaning their closure rate was much higher.
The Ministry of SMEs and Startups analyzed this as an indication that the impact of closures was concentrated in sectors where small business owners are active.
By business type, the closure rate for individual business owners (9.06 percent) was higher than that for corporations (5.79 percent).
Among individual business owners, the closure rate was higher for smaller entities, in the order of simplified taxpayers (12.15 percent), general taxpayers (8.34 percent), and tax-exempt business owners (6.46 percent).
By sector, the retail industry had the highest closure rate (15.40 percent), followed by food service (15.14 percent), services (9.15 percent), lodging (8.18 percent), and wholesale (7.25 percent).
More than half of the reasons for closure were attributed to "business sluggishness."
The percentage of those who stated they closed due to business sluggishness has steadily increased from 48.9 percent in 2023 to 50.2 percent in 2024 and 50.4 percent in 2025, showing an increase in involuntary closures where owners had to shut down because they could no longer hold on.
In particular, this figure rose to 55.7 percent for the six major small business sectors.
By age group, the closures were in the order of 40 to 60 years old (47.2 percent), under 40 (28.7 percent), and 60 or older (24.4 percent).
The proportion of closures among small business owners aged 60 and older is on an upward trend, and the proportion of closures among young small business owners has increased in major small business sectors.
Short-term closures of less than 3 years decreased from 56.1 percent in 2023 to 50.9 percent in 2025, but the proportion of closures for those in business for 3 to 10 years rose from 31.9 percent to 35.5 percent.
Closures of "10 years or more" also increased from 12.0 percent to 13.7 percent.
Based on this, the Ministry of SMEs and Startups interpreted that even businesses with a certain foundation are being affected by economic difficulties.
The closure rate in the metropolitan area was 8.87 percent, higher than the 8.35 percent in non-metropolitan areas.
Among metropolitan governments, Incheon had the highest rate (9.73 percent), while South Jeolla Province had the lowest (7.31 percent). As for the reason for deciding to close, 70.9 percent cited "worsening profitability and sluggish sales," followed by "personal reasons such as family" (13.7 percent) and "retirement due to health or old age" (12.1 percent).
Reasons for "sluggish sales" included "a decline in customers due to weak domestic demand" (62.5 percent) and rising costs for "raw materials" (29.4 percent), "labor" (28.8 percent), and "fixed costs" (24.9 percent).
64.4 percent of those who closed their businesses stated they made the decision when their normal sales dropped by 40 percent or more.
At the time of deciding to close, 68.5 percent held debt, with an average debt amount of 85.31 million won.
Specifically, they borrowed 34.83 million won from first-tier financial institutions, 25.85 million won in loans guaranteed by regional credit guarantee foundations, and 12.93 million won from second-tier financial institutions.
Debt amounts by age group were 35.67 million won for those in their 20s or younger, 72.95 million won for those in their 30s, 76.73 million won for those in their 40s, 84.24 million won for those in their 50s, and 98.97 million won for those in their 60s or older, showing that the older the owner, the higher the debt.
It took an average of 7.7 months from the decision to close to the actual closure, such as through the cancellation of business registration.
The biggest difficulty experienced during the closure process was "repaying loans" (45.5 percent), followed by deciding the timing of closure (37.3 percent) and recovering deposits and key money (30.7 percent).
The average cost of closing a business was 12.86 million won.
Of this, 5.59 million won was spent on clearing out the store, 2.21 million won on raw materials, and 2.05 million won on employee severance pay.
Government support programs used during closure were the Hope Return Package (75.5 percent), Yellow Umbrella Deduction (18.2 percent), and regional credit guarantee foundation guarantees (11 percent).
Support programs that need to be expanded were identified as "support for closure costs" (47.3 percent), "support for re-starting a business or finding employment" (38.8 percent), and "deferral of repayment and interest reduction" (32.1 percent).
Difficulties after closure included "lack of household living expenses" (40.5 percent), "difficulty in economic activities due to debt" (22.1 percent), "lack of alternatives for future economic activities" (19.4 percent), and "mental distress over business failure" (7.8 percent).
Regarding life after closure, 33.8 percent responded that they "cover living expenses with existing assets."
The Ministry of SMEs and Startups plans to research statistics on post-closure recovery paths with the National Data Agency and announce them in September, and starting next year, it plans to announce "statistics on the status and conditions of business closures" every July.
Choi Won-young, Director General for Small Business Policy at the Ministry of SMEs and Startups, said, "We will build a seamless support system from pre-closure crisis diagnosis and notification to post-closure recovery by linking statistics related to closed small business owners in a multi-dimensional way," adding, "We plan to hold online and offline consultation sessions in major regions for small business owners who are in management crises or have closed their businesses."
(Photo: Yonhap News)