The role of third-party intermediaries in government support programs is drawing closer scrutiny within Korea’s maturing startup ecosystem. With founders often turning to so-called “brokers” to navigate subsidy applications, the Ministry of SMEs and Startups (MSS) is drafting legislation to separate illegal practices from legitimate consulting (broker vs. consultant) — a move aimed at improving transparency and safeguarding entrepreneurs in a maturing ecosystem.
SME Ministry Takes Aim at Ambiguous Third-Party Roles with New Bill Study
The Ministry of SMEs and Startups (MSS) is preparing legislation to address the blurred line between illegal “brokers” and legitimate consultants in government support programs.
With startups and SMEs often relying on intermediaries to navigate complex subsidy programs, the ministry aims to establish clear criteria, reduce improper practices, and bring greater transparency to a market that has long operated in legal and regulatory gray zones.
On August 31, government officials confirmed that MSS will commission a research study for a draft bill tentatively titled the “Act on the Prevention of Improper Third-Party Intervention.” The study, to be completed by year-end, will lay the foundation for legislative proposals in early 2026.
Broker vs. Consultant: Eradication and Building Legitimate Standards
Until now, government policy discussions focused largely on eliminating brokers, who are often accused of falsifying documents, impersonating officials, or charging excessive retainers and success fees.
But the new study will also explore whether standardized consulting services can play a legitimate role in helping SMEs apply for government support programs.
The ministry initially planned to include three points in the draft bill:
- Establishing a legal definition of improper third-party intervention.
- Codifying a prohibition clause against such conduct.
- Creating a legal basis for policy finance institutions to sanction brokers.
However, after repeated feedback from SME founders during the 4th SME Policy Site Tour, the scope has expanded. Minister Han Seong-sook has directed staff to also examine whether consultants can be formally recognized within a regulated framework.
Field Voices on Broker vs. Consultant: Cost, Transparency, and Demand
Startup and SME leaders acknowledge that demand for consulting exists because many lack information or resources.
Jung Hye-in, CEO of iTruck, explained that she once paid around ₩600,000 (approx. $444) for a broker to review her grant proposal from the perspective of evaluators:
“It cost about KRW 600,000 up front for someone to review my report from the perspective of an evaluator. If we had easier access to such guidance, it would be far less difficult for new founders.”
Oh Kyung-jin, CEO of Taelim Industry, also added:
“The current market isn’t transparent — prices are arbitrary, and many exploit this. Standardizing the term ‘broker’ and setting institutional guidelines could be one way to solve it.”
Still, cases of abuse remain a concern. Brokers have been reported to charge upfront retainers, demand success fees of about 15% upon approval, or even falsify documents to inflate subsidy amounts.
The Ministry of SMEs and Startups is therefore weighing measures such as introducing standard contracts that clearly define consulting scope, fees, and responsibilities.
Suggestions for Institutionalized Consulting
Some industry leaders argue that ignoring the consulting market only drives it underground. One SME manufacturer told officials that predefined fee structures with reimbursement options could allow consulting to develop into a legitimate business area, rather than fostering more illegal brokers.
Others propose using MSS-affiliated associations, including Innobiz, the Korea Venture Business Association, or MainBiz to provide structured services.
Kim Jung-hyuk, CEO of CyberTech Friend, suggested:
“If associations provided consulting to their members, support would be more efficient and post-project management more effective than leaving companies to hire individual brokers.”
South Korea is Prioritizing Founder Protection and Transparency
Finally, the debate over broker vs. consultant underscores broader questions about policy accessibility, founder education, and fairness within the whole startup and SME ecosystem in South Korea. Government support programs remain vital for early-stage companies, but uneven information and opaque consulting practices risk undermining trust.
By moving toward a formal framework: through prohibition, standardization, or institutionalization, the MSS is signaling that founder protection and transparency are priorities for Korea’s next stage of ecosystem growth.
And so, if enacted, the proposed legislation could reshape how startups and SMEs engage with third-party advisors, transforming a market currently dominated by informal actors into one governed by legal standards, standard contracts, and association-backed support.
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