[Congressional Record Volume 145, Number 15 (Wednesday, January 27, 1999)]
[Senate]
[Pages S1022-S1026]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BOND (for himself, Mr. Kerry, Mr. Bennett, Mr. Dodd, Ms. 
        Snowe, and Mr. Moynihan):
  S. 314. A bill to provide a loan guarantee program to address the 
Year 2000 computer 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, Snowe, Dodd, Kerry, and Moynihan. This bill provides small 
businesses with the resources necessary to repair Year 2000 computer 
problems. Last year I introduced a similar bill that the Committee on 
Small Business adopted by an 18-0 vote and that the full Senate 
approved by unanimous consent. Unfortunately, the House of 
Representatives did not act on the legislation prior to adjournment. I 
am reintroducing this bill because the consequences of Congress not 
taking action to assist small business with their Y2K problems are too 
severe to ignore.
  Given the effects a substantial number of small business failures 
will have on our nation's economy, it is imperative that Congress 
promptly pass legislation that ensures that small businesses are aware 
of the Y2K problem and have access to capital to fix such problems. 
Moreover, it is imperative that Congress pass such legislation before 
the problem occurs, not after it has already happened. It is, 
therefore, with a sense of urgency that I am introducing the Small 
Business Year 2000 Readiness Act.
  The problem is that certain computers and processors in automated 
systems will fail because such systems will not recognize the Year 
2000. In fact, 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 or if it has automated manufacturing equipment.
  Last June, 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--in fact it is poor at best. The Committee 
received testimony that the entities most at risk from Y2K failures are 
small and medium-sized companies, not larger companies. The major 
reason for this anomaly is that many small companies have not begun to 
realize how much of a problem Y2K failure will be, and many may not 
have the access to capital to cure such problems before they cause 
disastrous results.
  A study on Small Business and the Y2K Problem sponsored by Wells 
Fargo Bank and the NFIB found that an estimated 4.75 million small 
employers are subject to the Y2K problem. This equals approximately 82 
percent of all small businesses that have at least two employees. The 
Committee has also received information indicating that approximately 
750,000 small businesses may either shut down due to the Y2K problem or 
be severely crippled if they do not take action to cure their Y2K 
problems. Such failures will affect not only the employees and owners 
or failed small businesses, but also their creditors, suppliers and 
customers. Lenders will face significant losses if their small business 
borrowers either go out of business or have a sustained period in which 
they cannot operate. Most importantly, however, is the fact that up to 
7.5 million families may face the loss of paychecks for a sustained 
period of time if small businesses do not remedy their Y2K problems. 
Given these facts, it is easy to forecast that there will be severe 
economic consequences if small businesses do not become Y2K compliant 
in time and there are only 11 months to go. Indeed the countdown is on.
  A good example of how small businesses are dramatically affected by 
the Y2K problem is the experience of Lloyd Davis, the owner of Golden 
Plains Agricultural Technologies, Inc., a farm equipment manufacturer 
in Colby, Kansas. Like many small business owners, Mr. Davis' business 
depends on trailing technology purchased over the years, including 386 
computers running custom software. Mr. Davis uses his equipment to run 
his entire business, including handling the company's payroll, 
inventory control, and maintenance of large databases on his customers 
and their specific needs. In addition, Golden Fields has a web site and 
sells the farm equipment it manufacturers over the internet.
  Unlike many small business owners, however, Mr. Davis is aware of the 
Y2K problem and tested his equipment to see if it 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 31, 1999. That is when Mr. Davis's problem began. Golden 
Fields had to purchase an upgraded software package. That cost $16,000. 
Of course, the upgraded software would not run on 386 computers, so 
Golden Fields had to upgrade to new hardware. Golden Fields had a 
computer on each of its 11 employees' desks, so that each employee 
could access the program that essentially ran the company and assist 
filling the internet orders the company received. Replacing all the 
hardware would have cost Golden Fields $55,000. Therefore, Golden 
Fields needed to expend $71,000 just to put itself in the same position 
it was in before the Y2K problem.
  Like many small business owners facing a large expenditure, Mr. Davis 
went to his bank to obtain a loan to pay for the necessary upgrades. 
Because Golden Fields was not already Y2K compliant, his bank refused 
him a loan because it had rated his company's existing loans as ``high-
risk''. Golden Fields was clearly caught in a Catch-22 situation. 
Nevertheless, Mr. Davis scrambled to save his company. He decided to 
lease the new hardware instead of purchasing it, but he will pay a 
price that ultimately will be more expensive than conventional 
financing. Moreover, instead of replacing 11 computers, Golden Fields 
only replaced six at a cost of approximately $23,000. Golden Fields 
will be less efficient as a result. The experience of Mr. Davis and 
Golden Fields 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.

  A recent survey conducted by Arthur Andersen's Enterprise Group on 
behalf of National Small Business United indicates that, like Golden 
Fields, many small businesses will incur significant costs to become 
Y2K compliant and are very concerned about it. The survey found that to 
become Y2K compliant, 29 percent of small- to medium-sized businesses 
will purchase additional hardware, 24 percent will replace existing 
hardware and 17 percent will need to convert their entire computer 
system. When then asked their most difficult challenge relating to 
their information technology, more than 54% of the businesses surveyed 
cited ``affording the cost.'' Congress must ensure that these 
businesses do not have the same trouble obtaining financing for their 
Y2K corrections as Mr. Davis and Golden Fields Agricultural 
Technologies. Moreover, Congress must deal with the concerns that have 
recently been raised that there may be a ``credit crunch'' this year 
with businesses, especially small businesses, unable to obtain 
financing for any purposes if they are not Y2K compliant.
  In addition to the costs involved, there is abundant evidence that 
small

[[Page S1023]]

businesses are, to date, generally unprepared for, and in certain 
circumstances, unaware of the Y2K problem. The NFIB's most recent 
survey indicates that 40 percent of small businesses don't plan on 
taking action or do not believe the problem is serious enough to worry 
about.
  The Small Business Year 2000 Readiness Act that I am introducing 
today 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 guarantees the principal amount 
of a loan made by a private lender to assist small businesses in 
correcting Year 2000 computer problems.
  Each lender that participates in the SBA's 7(a) business loan program 
is eligible to participate in the Y2K loan program. This includes more 
than 6,000 lenders located across the country. To ensure that the SBA 
can roll out the loan program promptly, the Act permits a lender to 
process Y2K loans pursuant to any of the procedures that the SBA has 
already authorized for that lender. Moreover, to assist small 
businesses that may have difficulty sustaining sufficient cash flows 
while developing Y2K solutions, the loan program will permit flexible 
financing terms so small businesses are able to service the new debt 
with available cash flow. For example, under certain circumstances, a 
borrower may defer principal payments for up to a year. Once the Y2K 
problem is behind us, the Act provides that the loan program will 
sunset.
  To assure that the loan program is made available to those small 
businesses that need it and to increase awareness of the Y2K problem, 
the legislation requires SBA to market this program aggressively to all 
eligible lenders. Awareness of this loan program's availability is of 
paramount importance. Financial institutions are currently required by 
Federal banking regulators to contact their customers to ensure that 
they are Y2K compliant. The existence of a loan program designed to 
finance Y2K corrections will give financial institutions a specific 
solution to offer small companies that may not be eligible for 
additional private capital and will focus the attention of financial 
institutions and, in turn, their small business customers to the Y2K 
problem.
  This loan program is of vital importance and we must ensure that 
there are sufficient funds to pay for it. Because the Y2K loan program 
would be part of the existing 7(a) business loan program, funds that 
have already been appropriated for the 7(a) program for fiscal year 
1999 may be used for the Y2K loan program. Nevertheless, I intend to 
watch the 7(a) loan program carefully to determine whether the Y2K loan 
program will cause the 7(a) loan program to run short of funds. If the 
appropriated amount will not support the expected loan volume of the 
general 7(a) loan program and the new Y2K loan program, I intend to 
work with my colleagues on the Appropriations Committee to attempt to 
secure additional funds targeted specifically for the Y2K loan program.
  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. 314

       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 may 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;
       (3) many small businesses do not have access to capital to 
     fix mission critical automated systems, which could result in 
     severe financial distress or failure for small businesses; 
     and
       (4) the failure of a large number of small businesses due 
     to the Year 2000 computer problem would 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 program.--
       ``(A) Definitions.--In this paragraph--
       ``(i) the term `eligible lender' means any lender 
     designated by the Administration as eligible to participate 
     in the general business loan program under this subsection; 
     and
       ``(ii) the term `Year 2000 computer problem' means, with 
     respect to information technology, and embedded systems, any 
     problem that adversely effects the processing (including 
     calculating, comparing, sequencing, displaying, or storing), 
     transmitting, or receiving of date-dependent 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 loan guarantee program, under which the 
     Administration may, during the period beginning on the date 
     of enactment of this paragraph and ending on December 31, 
     2000, guarantee loans made by eligible lenders to small 
     business concerns in accordance with this paragraph; and
       ``(ii) notify each eligible lender of the establishment of 
     the program under this paragraph, and otherwise take such 
     actions as may be necessary to aggressively market the 
     program under this paragraph.
       ``(C) Use of funds.--A small business concern that receives 
     a loan guaranteed under this paragraph shall only use the 
     proceeds of the loan to--
       ``(i) address the Year 2000 computer problems of that small 
     business concern, including the repair and acquisition of 
     information technology systems, the purchase and repair of 
     software, the purchase of consulting and other third party 
     services, and related expenses; and
       ``(ii) provide relief for a substantial economic injury 
     incurred by the small business concern as a direct result of 
     the Year 2000 computer problems of the small business concern 
     or of any other entity (including any service provider or 
     supplier of the small business concern), if such economic 
     injury has not been compensated for by insurance or 
     otherwise.
       ``(D) Loan amounts.--
       ``(i) In general.--Notwithstanding paragraph (3)(A) and 
     subject to clause (ii) of this subparagraph, a loan may be 
     made to a borrower under this paragraph even if the total 
     amount outstanding and committed (by participation or 
     otherwise) to the borrower from the business loan and 
     investment fund, the business guaranty loan financing 
     account, and the business direct loan financing account would 
     thereby exceed $750,000.
       ``(ii) Exception.--A loan may not be made to a borrower 
     under this paragraph if the total amount outstanding and 
     committed (by participation or otherwise) to the borrower 
     from the business loan and investment fund, the business 
     guaranty loan financing account, and the business direct loan 
     financing account would thereby exceed $1,000,000.
       ``(E) Administration participation.--Notwithstanding 
     paragraph (2)(A), in an agreement to participate in a loan 
     under this paragraph, participation by the Administration 
     shall not exceed--
       ``(i) 85 percent of the balance of the financing 
     outstanding at the time of disbursement of the loan, if the 
     balance exceeds $100,000;
       ``(ii) 90 percent of the balance of the financing 
     outstanding at the time of disbursement of the loan, if the 
     balance is less than or equal to $100,000; and
       ``(iii) notwithstanding clauses (i) and (ii), in any case 
     in which the subject loan is processed in accordance with the 
     requirements applicable to the SBAExpress Pilot Program, 50 
     percent of the balance outstanding at the time of 
     disbursement of the loan.
       ``(F) Periodic reviews.--The Inspector General of the 
     Administration shall periodically review a representative 
     sample of loans guaranteed under this paragraph to mitigate 
     the risk of fraud and ensure the safety and soundness of the 
     loan program.
       ``(G) Annual 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 carried out under this paragraph during the preceding 
     12-month period, which shall include information relating 
     to--
       ``(i) the total number of loans guaranteed under this 
     paragraph;
       ``(ii) with respect to each loan guaranteed under this 
     paragraph--

       ``(I) the amount of the loan;
       ``(II) the geographic location of the borrower; and
       ``(III) whether the loan was made to repair or replace 
     information technology and other automated systems or to 
     remedy an economic injury; and

       ``(iii) the total number of eligible lenders participating 
     in the program.''.
       (b) Guidelines.--

[[Page S1024]]

       (1) In general.--Not later than 30 days after the date of 
     enactment of this Act, the Administrator of the Small 
     Business Administration shall issue guidelines 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 that it would be 
     inconsistent with this section or section 7(a)(27) of the 
     Small Business Act, as added by this section, the guidelines 
     issued under this subsection shall, with respect to the loan 
     program established under section 7(a)(27) of the Small 
     Business Act, as added by this section--
       (A) provide maximum flexibility in the establishment of 
     terms and conditions of loans originated under the loan 
     program so that such loans may be structured in a manner that 
     enhances the ability of the applicant to repay the debt;
       (B) if appropriate to facilitate repayment, establish a 
     moratorium on principal payments under the loan program for 
     up to 1 year beginning on the date of the origination of the 
     loan;
       (C) provide that any reasonable doubts regarding a loan 
     applicant's ability to service the debt be resolved in favor 
     of the loan applicant; and
       (D) authorize an eligible lender (as defined in section 
     7(a)(27)(A) of the Small Business Act, as added by this 
     section) to process a loan under the loan program in 
     accordance with the requirements applicable to loans 
     originated under another loan program established pursuant to 
     section 7(a) of the Small Business Act (including the general 
     business loan program, the Preferred Lender Program, the 
     Certified Lender Program, the Low Documentation Loan Program, 
     and the SBAExpress Pilot Program), if--
       (i) the eligible lender is eligible to participate in such 
     other loan program; and
       (ii) the terms of the loan, including the principal amount 
     of the loan, are consistent with the requirements applicable 
     to loans originated under such other loan program.
       (c) Repeal.--Effective on December 31, 2000, this section 
     and the amendments made by this section are repealed.

 Mr. KERRY. Mr. President, today I join my colleagues--Chairman 
Bond of the Small Business Committee and Senators Bennett and Dodd of 
the Special Committee on the Year 2000 Technology Problem--to introduce 
a bill that provides affordable loans to small businesses preparing for 
or responding to the Year 2000 computer problem.
  As Ranking Member of the Committee on Small Business, I believe it is 
in our economic best interest to make sure that our small businesses, 
some 20 million if we include the self-employed, are still up and 
running, creating jobs and providing services, on and after January 1, 
2000.
  Will the new year bring national ``hiccups'' or ``worldwide 
recession''? It depends on who you ask. Peter de Jager, considered one 
of the first Year-2000 crusaders, believes there will be problems, but 
not devastation. As published in the December 31, 1998 issue of 
``ITAA's (Information Technology Association of America) Year 2000 
Outlook'': De Jager says ``a blackout across North America is 
`inconceivable' and power brown-outs, should they occur, will be 
localized.''
  However, if you ask a particular senior executive at Barclays about 
the millennium computer bug, his advice would be to sell your home, 
stockpile cash and buy gold in case of a global economic collapse. He 
and other international bank managers fear a run on deposits.
  Because our economy is inter-dependent and most of our technology is 
date-dependent, either scenario concerns me, particularly for small 
businesses. National surveys and conversations with Y2K consultants and 
commercial lenders in Massachusetts tell a story that varies from 
ignorance to denial to paralysis to apathy.
  That's serious when you consider a 1998 Arthur Andersen Enterprise 
Group and National Small Business United survey that found 94 percent 
of all small and mid-sized businesses have computers, and only 62 
percent of all small and mid-sized businesses, regardless of whether 
they rely on computers or date-dependent equipment, have ``begun 
addressing'' Y2K issues. The good news is that a greater percentage of 
small and mid-sized businesses are preparing for Y2K than last summer; 
the bad news is that they've only ``begun'' and a significant group is 
taking a wait-and-see approach.
  And what about those who have been slow to act or have no plans to 
act? How do we reach them and facilitate assessment and remediation of 
their businesses? By making the solution affordable.
  The Andersen and NSBU study showed that 54 percent of all respondents 
said ``affording the cost [was the] most difficult challenge in dealing 
with information technology.'' Cost is a legitimate, albeit risky, 
reason to delay addressing the Y2K problem--saving till you're a little 
ahead or waiting until the last possible moment to take on new debt to 
finance changes are strategies many small businesses are forced to 
adopt.
  Most of the media attention has been on big business, the challenges 
they face and the costs they are bearing to fix the problem. Small 
businesses face the same effects of the Y2K problem as big businesses, 
but, as the study found, they often have little or no resources to 
devote to detecting the extent of the problem or developing a workable 
and cost-effective solution. If you own your facility, is the HVAC 
(Heating Ventilation and Air Conditioning) system in compliance and how 
much will it cost to fix a system that serves 5,000 square feet? Does 
the security system need an upgrade or to be replaced? If you own a dry 
cleaner and you hire a consultant to assess your equipment in your 
franchise, will remediation eat all your profits or set you back? These 
are questions to which some business owners can't afford to hear the 
answers. It may come down to a choice between debt or dissolution.
  The Year 2000 Readiness Act gives eligible business owners a viable 
option. To make it easy for lenders and timely for borrowers, this Act, 
like the Y2K small business loan bill I introduced last Congress, 
expands the 7(a) loan program, one of the U.S. Small Business 
Administration's most popular and successful guaranteed lending 
programs.
  Currently, the 7(a) program is intended to give small businesses 
credit and capital, including working capital to grow their companies. 
If the Year 2000 Readiness Act is enacted, that program could be used 
until the end of the year 2000 to address Y2K problems through 
assessment, planning, remediation and testing computers and equipment, 
or to provide relief for substantial economic injury a small business 
suffers as a direct result of Y2K problems, such as a brown-out or a 
temporarily incapacitated supplier.
  The terms of 7(a) loans are familiar to lenders and small-business 
owners alike and, therefore, the loans are easy to apply for and 
process. They are structured to be approved or denied, in most cases, 
in less than 48 hours. We expect the average Y2K 7(a) loan to be less 
than $100,000.
  To give lenders an incentive to make 7(a) loans to small businesses 
for Y2K problems and related economic injury, this Act raises the 
government guaranties of the existing 7(a) program by ten percent. 
Under special circumstances, it also raises the dollar cap of loan 
guaranties from $750,000 to $1 million for these Y2K small business 
loans.
  For Y2K 7(a) loans of more than $100,000, the government will 
guarantee 85 percent, and for such loans of $100,000 or less, the 
government will guarantee 90 percent. For those lenders with special 
authority to approve their loans, this Act allows them to use the SBA 
Express Pilot Program--a pilot that makes it easy for lenders to 
process loans worth up to $150,000 using their own paperwork and making 
same-day approval--for Y2K loans. SBA Express loans are guaranteed at 
50 percent.
  This legislation encourages lenders to work with small businesses 
addressing Y2K-related problems by arranging for affordable financing. 
When quality of credit comes into question, lenders are directed to 
resolve reasonable doubts about the applicant's ability to repay the 
debt in favor of the borrower. And when appropriate, to establish a 
moratorium for up to one year on principal payments on Y2K 7(a) loans, 
beginning when the loans are originated.
  To protect against fraud, abuse or double compensation, this Act 
prohibits a business from qualifying for a Y2K 7(a) loan if it has 
already received insurance proceeds for Y2K problems or economic injury 
related to Y2K problems.
  As important as this Y2K loan program is, it must be available in 
addition to, and not in lieu of, the existing 7(a) program. The 7(a) 
program is a vital capital source for small businesses, providing more 
than 42,000 loans in 1998, totaling $9 billion. Nine hundred sixty-six 
of those loans went to small businesses in Massachusetts.

[[Page S1025]]

 With defaults down, recoveries up and the government's true cost, 
called the subsidy rate, at 1.39 percent, we should not create burdens 
that would slow or reverse this trend. To protect the existing 7(a) 
program, we need to make sure that it is adequately funded for fiscal 
years 1999 and 2000. Because the Y2K loan program would be part of the 
existing 7(a) business loan program, funds that have already been 
appropriated for the 7(a) program may be used for the Y2K loan program. 
As of two weeks past the end of the first quarter of fiscal year 1999, 
SBA's records show that the program has already used $2.5 billion 
(roughly 23 percent) of the total $10 billion appropriated. Typically 
the demand for these loans increases by as much as ten percent in the 
spring and summer. If this holds true for this fiscal year, it is an 
indication that the program will need nearly all of its funds to meet 
the regular loan demand.
  Under these circumstances, we must be diligent about monitoring the 
7(a) loan program to make sure the Y2K loans don't drain the program 
and cause it to run out of money. If we do find that the appropriated 
amount is inadequate to support the general 7(a) loan program and the 
new Y2K loan program, we will need to get more funding. Though it's 
never easy to get more money, Chairman Bond, who also serves on the 
Committee on Appropriations and is chairman of one of the Appropriation 
subcommittees, has agreed to attempt to secure additional funds 
targeted specifically for the Y2K loan program. I thank Chairman Bond 
for his commitment, and offer my help if the need arises.
  I am hopeful that this legislation can be passed in the Small 
Business Committee and the full Senate as quickly as possible to begin 
assisting small businesses in need of this important initiative. This 
is a good program, which with adequate funding, will help many small 
businesses get a strong start in 2000 and the new millennium.
 Mr. DODD, Mr. President, I rise today to join my colleagues in 
supporting this very important legislation. Together with Senators 
Bond, Kerry, and Bennett, I recognize the necessity of strengthening 
the ability of America's small businesses to negotiate the complex 
challenges related to the Year 2000 computer problem. This legislation 
is designed to assist the 14.5 million small businesses that may have 
Y2K concerns. According to various studies, almost half of all of the 
small businesses in America are not ready to respond to the possible 
effects of the Y2K computer problem.
  I would like to take a moment and thank Chairman Bond and Ranking 
Member John Kerry of the Small Business Committee for their leadership 
and cooperation with the Special Committee on the Year 2000, on which I 
serve as Vice-Chair. The object of this cooperation between our two 
Committees is to strengthen the economic backbone of America, small 
businesses, as they face a potentially devastating threat to their very 
existence. This is not to alarm anyone, but merely to warn of a 
possible danger. As I have said on numerous occasions, I believe very 
strongly that we must prepare and plan for any Y2K contingency. We must 
be vigilant and provide assistance for small businesses. Unfortunately, 
many small businesses do not consider themselves in danger from the 
effects of the Y2K problem and so have taken little, if any, steps to 
address problems that may arise. This extends to reviewing whether all 
of their suppliers, customers and financial institutions are free from 
the Y2K glitch. Even if our small enterprises were aware of all 
problems that face them, not all of them have access to the necessary 
funds to take corrective measures.
  This legislation helps our nation's small enterprises in two ways. 
First, if a company wants to remediate or fix its own equipment that is 
not Y2K compliant, this bill provides easier access to loans. 
Hopefully, this will encourage the small business owners to learn of 
their companies deficiencies, and then correct them in a timely manner 
so that company does not stop working.
  Second, if a company faces economic disruption due to outside Y2K 
related problems, then that company may apply for funds to assist it. 
This is the area to which I am especially sensitive. We do not know 
exactly what will work and what will need immediate attention so that 
our lives, our jobs, our economic well being, can continue. To address 
that lack of knowledge, this bill will allow small business owners 
access to financial support guaranteed by the Small Business 
Administration until December 31, 2000. This is very important. Our 
concern is not just January 1, 2000, but the continual smooth operation 
of our nation and our nation's small businesses throughout this 
momentous year.
  Less than one-third of small businesses have checked the Y2K 
preparedness of the companies that they depend upon to continue to 
function everyday. Though only half of the small businesses in America 
classify themselves as dependent upon computers, many of the small 
businesses in America are dependent on other businesses, which are 
dependent upon computers. Like a cog in the wheel of our nation's 
economy, if one small business suddenly ceases to function, its effects 
may be felt across the country. That is why I am glad to support this 
legislation to assist the United States small business community.
  An ounce of prevention is worth a pound of cure. We must help our 
nation's small businesses regardless of when they become aware of the 
problems facing them. This legislation is designed to do exactly 
that.
 Mr. MOYNIHAN. Mr. President, I am pleased to join the Chairman 
and Ranking Members of the Committee on Small Business and the Special 
Committee on the Year 2000 Technology Problem--Christopher S. Bond, 
John F. Kerry, Robert F. Bennett, and Christopher J. Dodd,--and Senator 
Olympia Snowe--in introducing the Small Business Year 2000 Readiness 
Act. I began warning about the Y2K problem three years ago. Since that 
time, people have begun to listen and progress has been made on the Y2K 
front. The Federal Government and large corporations are expected to 
have their computers functioning on January 1, 2000. Good news indeed. 
But small businesses and state and local governments are lagging behind 
in fixing the millennium computer problem.
  Last week, Chairman Bennett, Senator Dodd, and I introduced the Y2K 
State and Local Government Assistance Programs Act of 1999. This bill 
provides a matching grant for states to work on the millennium computer 
problem. Failure of state computers could have a devastating effect on 
those individuals who rely on essential state-administered poverty 
programs, such as Medicaid, food stamps, and child welfare and support. 
These individuals cannot go a day, a week, or a month if these programs 
are not working properly. Similarly, the collapse of small businesses' 
computer systems could have the same paralyzing effect on society as a 
collapse of state and local government's computer systems.
  The Small Business Year 2000 Readiness Act, which we are introducing 
today, will assist small businesses in preparing for the year 2000. It 
expands the Small Business Administration's 7(a) loan program to 
provide guaranteed loans to small businesses to address the Y2K 
problem. This bill raises the government guaranties of the existing 
7(a) program by ten percent. For Y2K 7(a) loans of more than $100,000, 
the government will guarantee 85 percent, and for such loans of 
$100,000 or less, the government will guarantee 90 percent. The 
increase in the loan guarantee is to encourage lenders to make Y2K-
related loans to small businesses. And the numbers show that small 
businesses need a great deal of assistance.
  A Wells Fargo Bank survey in December of 1998 found that ``Y2K is not 
a priority for most small business owners and for as many as one-third 
of all owners who are vulnerable to the millennium bug, it is not a 
priority.'' The report goes on to say that ``it is likely that over one 
million small employers, and perhaps as high as 1.5 million, exposed to 
the Y2K problem will enter the next century having taken no preventive 
measures.'' The GartnerGroup found that as of the third quarter of 
1998, small companies have just five percent of their computers 
remediated, and only 30 percent of small businesses have begun testing. 
The GartnerGroup expects that 50 percent to 60 percent of small 
companies will experience at least one mission critical system failure. 
We must not let this happen.
  Historically the fin de siecle has caused quite a stir. Prophets, 
prelates,

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monks, mathematicians, and soothsayers warn Anno Domini 2000 will draw 
the world to its catastrophic conclusion. I am confident that the Y2K 
problem will not play a part in this. But we must continue to work on 
this problem with purpose and dedication. Benjamin Disraeli wrote: 
``Man is not the creature of circumstances. Circumstances are the 
creatures of men.'' We created the Y2K problem and we must fix it. 

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