In an effort to head-off what he considers an economic backlash and the potential loss of income for millions of families, Senator Christopher "Kit" Bond (R-Missouri), chairman of the Committee on Small Business, introduced legislation yesterday to assist small businesses finance repairs of computer hardware and software systems that are unable to handle the Year 2000 technology problem.
The "Small Business Year 2000 Readiness Act" will authorize the U.S. Small Business Administration (SBA) to expand its guaranteed loan program to provide eligible businesses with the means to continue operating successfully after January 1, 2000, and make lenders and small firms more aware of the "dangers that still lie ahead."
The Year 2000 bug could cripple software that cannot accommodate a four-digit entry for the current year. Thus when 2000 begins, many programs will register only the "00" and read the date as 1900.
Senator Christopher Dodd (D-Connecticut), and vice-chairman of the Senate Special Committee on the Year 2000 Technology Problem, cosponsored the bill and added language to the proposal that would allow small businesses to use Y2K loan proceeds to offset economic injury sustained after the year 2000 and as a result of Y2K problems.
The proposed bill requires the SBA to establish a limited-term loan program whereby the agency guarantees the principal amount of a loan made by a private lender to assist small businesses in correcting Y2K problems.
To assist small businesses that may have difficulty maintaining cash flows while correcting their Y2K glitches, the bill will also allow limited deferments on principal payments, longer maturity terms, and expanded options for refinancing.
"Many small companies have not begun to realize how much of a problem Y2K failures will be, and many may not have access to capital to cure such problems before they cause disastrous results," Bond said in a statement. "There is a significant likelihood that the Y2K issue will affect a broad range of small businesses and as many as 7.5 million families that may be dependent on those same firms for their income."
The outlook for small business is not good, Bond added. He estimates that 750,000 small businesses are at risk of temporary shutdown or significant financial loss, and that Y2K could affect as many as 4.75 million small businesses nationwide.
Citing a recent survey sponsored by the National Federation of Independent Business, he noted that 40 percent of small businesses say they do not plan on taking action on the Y2K problem or do not believe it is serious enough to worry about.
Another study, conducted by the Arthur Andersen's Enterprise Group for National Small Business United, revealed that 56 percent of small and midsized businesses surveyed say they will be forced to upgrade their computer systems in order to cope with the Y2K problem. About 34 percent said they will face Y2K-related software replacement while 24 percent face hardware replacement.
Y2K failures, he said, will not only affect the employees and owners of failed small businesses, but also their creditors, suppliers, and customers. Lenders also will face significant losses if their small business borrowers either go out of business or have a sustained period in which they cannot operate.