[Congressional Record Volume 144, Number 105 (Thursday, July 30, 1998)]
[Senate]
[Pages S9431-S9433]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BOND (for himself, Ms. Snowe, and Mr. Bennett):
  S. 2372. A bill to provide for a pilot loan guarantee program to 
address Year 2000 problems of small business concerns, and for other 
purposes; to the Committee on Small Business.


                 small business year 2000 readiness act

  Mr. BOND. Mr. President, I rise today to introduce the Small Business 
Year 2000 Readiness Act along with my colleagues Senators Bennett and 
Snowe. This bill provides small businesses with the resources necessary 
to repair Year 2000 computer problems. This legislation is an important 
step toward avoiding the widespread failure of small businesses.
  The problem, as many Senators are aware, is that certain computers 
and processors in automated systems will fail because such systems will 
not recognize the Year 2000. My colleague Senator Bennett, who is the 
Chairman of the Senate Special Year 2000 Technology Problem Committee 
and is co-sponsoring this bill, is very well versed in this problem and 
has been active in getting the word out to industries and to agencies 
of the federal government of the drastic consequences that may result 
from the Y2K problem.
  Recently, the Committee on Small Business, which I chair, held 
hearings on the effect the Y2K problem will have on small businesses. 
The outlook is not good. The Committee received testimony that the 
companies most at risk from Y2K failures are small and medium-sized 
industries, not larger companies. The major reasons for this anomaly is 
that many small companies have not begun to realize how much of a 
problem Y2K failures will be and may not have the access to capital to 
cure such problems before they cause disastrous effects.
  A study on Small Business and the Y2K Problem sponsored by Wells 
Fargo Bank and the NFIB found that an estimated four and three-quarter 
million small employers are exposed to the Y2K problem. This equals 
approximately 82 percent of all small businesses that have at least two 
employees. Such exposure to the Y2K problem will have devastating 
affects on our economy generally. As the result of communications with 
small businesses, computer manufacturers, consultants and groups, the 
Small Business Committee has found there is significant likelihood that 
the Y2K issue will cause many small businesses to close, playing a 
large role in Federal Reserve Chairman Greenspan's prediction of a 40 
percent chance for recession at the beginning of the new millennium.
  The Committee received information indicating that approximately 
330,000 small businesses will shut down due to the Y2K problem and an 
even larger number will be severely crippled. Such failures will affect 
not only the employees and owners of such small businesses, but also 
the creditors, suppliers and customers of such failed small businesses. 
Lenders, including banks

[[Page S9432]]

and non-bank lenders, that have extended credit to small businesses 
will face significant losses if small businesses either go out of 
business or have a sustained period in which they cannot operate.
  It must be remembered that the Y2K problem is not a problem for only 
those businesses that have large computer networks or mainframes. A 
small business is at risk if it uses any computers in its business, if 
it has customized software, if it is conducting e-commerce, if it 
accepts credit card payments, if it uses a service bureau for its 
payroll, if it depends on a data bank for information, if it has 
automated equipment for communicating with its sales or service force 
of if it has automated manufacturing equipment.
  A good example of how small businesses are dramatically affected by 
the Y2K problem is the experience of John Healy, the owner of Coventry 
Spares Ltd. in Holliston, Massachusetts, as reported in INC Magazine. 
Coventry Spares is a distributor of vintage motorcycle parts. Like many 
small business owners, Mr. Healy's business depends on trailing 
technology purchased over the years, including a 286 computer, with 
software that is 14 years old and an operating system that is six or 
seven versions out of date. Mr. Healy uses this computer equipment, 
among other matters, for handling the company's payroll, ordering, 
inventory control, product lookup and maintaining a database of 
customers and subscribers to a vintage motorcycle magazine he 
publishes. The system handles 85 percent of his business and, without 
it working properly, Mr. Healy stated that ``I'd be a dead duck in the 
water.'' Unlike many small business owners, however, Mr. Healy is aware 
of the Y2K problem and tested his equipment to see if his equipment 
could handle the Year 2000. His tests confirmed his fear--the equipment 
and software could not process the year 2000 date and would not work 
properly after December 21, 1999. Therefore, Mr. Healy will have to 
expand over $20,000 to keep his business afloat. The experience of Mr. 
Healy has been and will continue to be repeated across the country as 
small businesses realize the impact the Y2K problem will have on their 
business.

  The Gartner Group, an international computer consulting firm, has 
conducted studies showing small businesses are way behind--the worst of 
all sectors studied--where they need to be in order to avoid 
significant failures due to non-Y2K compliance. It estimates that only 
15 percent of all businesses with under 200 employees have even begun 
to inventory the automated systems that may be affected by this 
computer glitch. That means that 85 percent of small businesses have 
not be even begun the initial task of determining how much of a problem 
they may have or taken steps to ensure that their businesses are not 
impaired by this problem.
  Given the effects a substantial number of small business failures 
will have on our nation's economy, it is imperative that Congress take 
steps to ensure that small businesses are aware of the Y2K problem and 
have access to capital to fix such problems. Moreover, it is imperative 
that Congress take such steps before the problem occurs, not after it 
has already happened. Therefore, today I am introducing the Small 
Business Year 2000 Readiness Act.
  This Act will serve the dual purpose of providing small businesses 
with the means to continue operating successfully after January 1, 
2000, and making lenders and small firms more aware of the dangers that 
lie ahead. The Act requires the Small Business Administration to 
establish a limited-term loan program whereby SBA would guarantee 50 
percent of the principal amount of a loan made by a private lender to 
assist small businesses in correcting Year 2000 computer problems. The 
loan amount would be capped at $50,000. The guarantee limit and loan 
amount will limit the exposure of the government and ensure that 
eligible lenders retain sufficient risk so that they make sound 
underwriting decisions.
  The Y2K loan program guidelines will be based on the guidelines SBA 
has already established governing its FA$TRACK pilot program. Lenders 
originating loans under the Y2K loan program would be permitted to 
process and document loans using the same internal procedures they 
would on loans of a similar type and size not governed by a government 
guarantee. Otherwise, the loans are subject to the same requirements as 
all other loans made under the (7)(a) loan program.
  Under the loan program, each lender designated as a Preferred Lender 
or Certified Lender by SBA would be eligible to participate in the Y2K 
loan program. This would include approximately 1,000 lenders that have 
received special authority from the SBA to originate loans under SBA's 
existing 7(a) loan program. The Year 2000 loan program would sunset 
after October 31, 2001.
  To assure that the loan program is made available to those small 
businesses that need it, the legislation requires SBA to inform all 
lenders eligible to participate in the program of the loan program's 
availability. It is intended that these lenders, in their own self-
interest, will contact their small business customers to ensure that 
they are Y2K complaint and inform them of the loan program if they are 
not.
  The Small Business Year 2000 Readiness Act is a necessary step to 
ensure that the economic health of this country is not marred by a 
substantial number of small business failures following January 1, 
2000, and that small businesses continue to be the fastest growing 
segment of our economy in the Year 2000 and beyond.
  Mr. President, I ask unanimous consent that the full text of the bill 
be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2372

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business Year 2000 
     Readiness Act''.

     SEC. 2. FINDINGS.

       Congress finds that--
       (1) the failure of many computer programs to recognize the 
     Year 2000 will have extreme negative financial consequences 
     in the Year 2000 and in subsequent years for both large and 
     small businesses;
       (2) small businesses are well behind larger businesses in 
     implementing corrective changes to their automated systems--
     85 percent of businesses with 200 employees or less have not 
     commenced inventorying the changes they must make to their 
     automated systems to avoid Year 2000 problems;
       (3) many small businesses do not have access to capital to 
     fix mission critical automated systems; and
       (4) the failure of a large number of small businesses will 
     have a highly detrimental effect on the economy in the Year 
     2000 and in subsequent years.

     SEC. 3. YEAR 2000 COMPUTER PROBLEM LOAN GUARANTEE PROGRAM.

       (a) Program established.--Section 7(a) of the Small 
     Business Act (15 U.S.C. 636(a)) is amended by adding at the 
     end the following:
       ``(27) Year 2000 computer problem pilot program.--
       ``(A) Definitions.--In this paragraph--
       ``(i) the term `eligible lender' means any lender 
     designated by the Administration as eligible to participate 
     in--

       ``(I) the Preferred Lenders Program authorized by the 
     proviso in section 5(b)(7); or
       ``(II) the Certified Lenders Program authorized in 
     paragraph (19); and

       ``(ii) the term `Year 2000 computer problem' means, with 
     respect to information technology, any problem that prevents 
     the information technology from accurately processing, 
     calculating, comparing, or sequencing date or time data--

       ``(I) from, into, or between--

       ``(aa) the 20th or 21st centuries; or
       ``(bb) the years 1999 and 2000; or

       ``(II) with regard to leap year calculations.

       ``(B) Establishment of program.--The Administration shall--
       ``(i) establish a pilot loan guarantee program, under which 
     the Administration shall guarantee loans made by eligible 
     lenders to small business concerns in accordance with this 
     subsection; and
       ``(ii) notify each eligible lender of the establishment of 
     the program under this paragraph.
       ``(C) Use of funds.--A small business concern that receives 
     a loan guaranteed under this paragraph shall use the proceeds 
     of the loan solely to address the Year 2000 computer problems 
     of that small business concern, including the repair or 
     acquisition of information technology systems and other 
     automated systems.
       ``(D) Maximum amount.--The total amount of a loan made to a 
     small business concern and guaranteed under this paragraph 
     shall not exceed $50,000.
       ``(E) Guarantee limit.--The guarantee percentage of a loan 
     guaranteed under this paragraph shall not exceed 50 percent 
     of the balance of the financing outstanding at the time of 
     disbursement of the loan.
       ``(F) Report.--The Administration shall annually submit to 
     the Committees on Small Business of the House of 
     Representatives and the Senate a report on the results of the 
     program under this paragraph, which shall include information 
     relating to--
       ``(i) the number and amount of loans guaranteed under this 
     paragraph;

[[Page S9433]]

       ``(ii) whether the loans guaranteed were made to repair or 
     replace information technology and other automated systems; 
     and
       ``(iii) the number of eligible lenders participating in the 
     program.''.
       (b) Regulations.--
       (1) In general.--Not later than 60 days after the date of 
     enactment of this Act, the Administrator of the Small 
     Business Administration shall issue final regulations to 
     carry out the program under section 7(a)(27) of the Small 
     Business Act, as added by this section.
       (2) Requirements.--Except to the extent inconsistent this 
     section or section 7(a)(27) of the Small Business Act, as 
     added by this section, the regulations issued under this 
     subsection shall be substantially similar to the requirements 
     governing the FA$TRACK pilot program of the Small Business 
     Administration, or any successor pilot program to that pilot 
     program.
       (c) Repeal.--Effective on October 1, 2001, this section and 
     the amendment made by this section are repealed.

     SEC. 4. PILOT PROGRAM REQUIREMENTS.

       Section 7(a)(25) of the Small Business Act (15 U.S.C. 
     636(a)(25)) is amended by adding at the end the following:
       ``(D) Notification of change.--Not later than 30 days prior 
     to initiating any pilot program or making any change in a 
     pilot program under this subsection that may affect the 
     subsidy rate estimates for the loan program under this 
     subsection, the Administration shall notify the Committees on 
     Small Business of the House of Representatives and the 
     Senate, which notification shall include--
       ``(i) a description of the proposed change; and
       ``(ii) an explanation, which shall be developed by the 
     Administration in consultation with the Director of the 
     Office of Management and Budget, of the estimated effect that 
     the change will have on the subsidy rate.
       ``(E) Report on pilot programs.--The Administration shall 
     annually submit to the Committees on Small Business of the 
     House of Representatives and the Senate a report on each 
     pilot program under this subsection, which report shall 
     include information relating to--
       ``(i) the number and amount of loans made under the pilot 
     program;
       ``(ii) the number of lenders participating in the pilot 
     program; and
       ``(iii) the default rate, delinquency rate, and recovery 
     rate for loans under each pilot program, as compared to those 
     rates for other loan programs under this subsection.''.
                                 ______