II

Calendar No. 18

106TH CONGRESS

1ST SESSION S. 314

[Report No. 106–5]

To provide for a loan guarantee program to address the Year 2000 computer

problems of small business concerns, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 27, 1999

Mr. BOND (for himself, Mr. KERRY, Mr. BENNETT, Mr. DODD, Ms. SNOWE,

Mr. MOYNIHAN, Mr. LEVIN, Mr. JOHNSON, Mr. JEFFORDS, and Mr.

LEAHY) introduced the following bill; which was read twice and referred

to the Committee on Small Business

FEBRUARY 23, 1999

Reported by Mr. BOND, without amendment

A BILL

To provide for a loan guarantee program to address the

Year 2000 computer problems of small business concerns, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Small Business Year

5 2000 Readiness Act’’.
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1 SEC. 2. FINDINGS.

2 Congress finds that—

3 (1) the failure of many computer programs to

4 recognize the Year 2000 may have extreme negative

5 financial consequences in the Year 2000, and in sub6 sequent years for both large and small businesses;

7 (2) small businesses are well behind larger busi8 nesses in implementing corrective changes to their

9 automated systems;

10 (3) many small businesses do not have access to

11 capital to fix mission critical automated systems,

12 which could result in severe financial distress or fail13 ure for small businesses; and

14 (4) the failure of a large number of small busi15 nesses due to the Year 2000 computer problem

16 would have a highly detrimental effect on the econ17 omy in the Year 2000 and in subsequent years.

18 SEC. 3. YEAR 2000 COMPUTER PROBLEM LOAN GUARANTEE

19 PROGRAM.

20 (a) PROGRAM ESTABLISHED.—Section 7(a) of the

21 Small Business Act (15 U.S.C. 636(a)) is amended by

22 adding at the end the following:

23 ‘‘(27) YEAR 2000 COMPUTER PROBLEM PRO24 GRAM.—

25 ‘‘(A) DEFINITIONS.—In this paragraph—
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1 ‘‘(i) the term ‘eligible lender’ means

2 any lender designated by the Administra3 tion as eligible to participate in the general

4 business loan program under this sub5 section; and

6 ‘‘(ii) the term ‘Year 2000 computer

7 problem’ means, with respect to informa8 tion technology, and embedded systems,

9 any problem that adversely effects the

10 processing (including calculating, compar11 ing, sequencing, displaying, or storing),

12 transmitting, or receiving of date-depend13 ent data—

14 ‘‘(I) from, into, or between—

15 ‘‘(aa) the 20th or 21st cen16 turies; or

17 ‘‘(bb) the years 1999 and

18 2000; or

19 ‘‘(II) with regard to leap year

20 calculations.

21 ‘‘(B) ESTABLISHMENT OF PROGRAM.—The

22 Administration shall—

23 ‘‘(i) establish a loan guarantee pro24 gram, under which the Administration

25 may, during the period beginning on the
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1 date of enactment of this paragraph and

2 ending on December 31, 2000, guarantee

3 loans made by eligible lenders to small

4 business concerns in accordance with this

5 paragraph; and

6 ‘‘(ii) notify each eligible lender of the

7 establishment of the program under this

8 paragraph, and otherwise take such actions

9 as may be necessary to aggressively market

10 the program under this paragraph.

11 ‘‘(C) USE OF FUNDS.—A small business

12 concern that receives a loan guaranteed under

13 this paragraph shall only use the proceeds of

14 the loan to—

15 ‘‘(i) address the Year 2000 computer

16 problems of that small business concern,

17 including the repair and acquisition of in18 formation technology systems, the pur19 chase and repair of software, the purchase

20 of consulting and other third party serv21 ices, and related expenses; and

22 ‘‘(ii) provide relief for a substantial

23 economic injury incurred by the small busi24 ness concern as a direct result of the Year

25 2000 computer problems of the small busi-
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1 ness concern or of any other entity (includ2 ing any service provider or supplier of the

3 small business concern), if such economic

4 injury has not been compensated for by in5 surance or otherwise.

6 ‘‘(D) LOAN AMOUNTS.—

7 ‘‘(i) IN GENERAL.—Notwithstanding

8 paragraph (3)(A) and subject to clause (ii)

9 of this subparagraph, a loan may be made

10 to a borrower under this paragraph even if

11 the total amount outstanding and commit12 ted (by participation or otherwise) to the

13 borrower from the business loan and in14 vestment fund, the business guaranty loan

15 financing account, and the business direct

16 loan financing account would thereby ex17 ceed $750,000.

18 ‘‘(ii) EXCEPTION.—A loan may not be

19 made to a borrower under this paragraph

20 if the total amount outstanding and com21 mitted (by participation or otherwise) to

22 the borrower from the business loan and

23 investment fund, the business guaranty

24 loan financing account, and the business
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1 direct loan financing account would there2 by exceed $1,000,000.

3 ‘‘(E) ADMINISTRATION PARTICIPATION.—

4 Notwithstanding paragraph (2)(A), in an agree5 ment to participate in a loan under this para6 graph, participation by the Administration shall

7 not exceed—

8 ‘‘(i) 85 percent of the balance of the

9 financing outstanding at the time of dis10 bursement of the loan, if the balance ex11 ceeds $100,000;

12 ‘‘(ii) 90 percent of the balance of the

13 financing outstanding at the time of dis14 bursement of the loan, if the balance is

15 less than or equal to $100,000; and

16 ‘‘(iii) notwithstanding clauses (i) and

17 (ii), in any case in which the subject loan

18 is processed in accordance with the re19 quirements applicable to the SBAExpress

20 Pilot Program, 50 percent of the balance

21 outstanding at the time of disbursement of

22 the loan.

23 ‘‘(F) PERIODIC REVIEWS.—The Inspector

24 General of the Administration shall periodically

25 review a representative sample of loans guaran-
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1 teed under this paragraph to mitigate the risk

2 of fraud and ensure the safety and soundness

3 of the loan program.

4 ‘‘(G) ANNUAL REPORT.—The Administra5 tion shall annually submit to the Committees on

6 Small Business of the House of Representatives

7 and the Senate a report on the results of the

8 program carried out under this paragraph dur9 ing the preceding 12-month period, which shall

10 include information relating to—

11 ‘‘(i) the total number of loans guaran12 teed under this paragraph;

13 ‘‘(ii) with respect to each loan guaran14 teed under this paragraph—

15 ‘‘(I) the amount of the loan;

16 ‘‘(II) the geographic location of

17 the borrower; and

18 ‘‘(III) whether the loan was made

19 to repair or replace information tech20 nology and other automated systems

21 or to remedy an economic injury; and

22 ‘‘(iii) the total number of eligible lend23 ers participating in the program.’’.

24 (b) GUIDELINES.—
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1 (1) IN GENERAL.—Not later than 30 days after

2 the date of enactment of this Act, the Administrator

3 of the Small Business Administration shall issue

4 guidelines to carry out the program under section

5 7(a)(27) of the Small Business Act, as added by this

6 section.

7 (2) REQUIREMENTS.—Except to the extent that

8 it would be inconsistent with this section or section

9 7(a)(27) of the Small Business Act, as added by this

10 section, the guidelines issued under this subsection

11 shall, with respect to the loan program established

12 under section 7(a)(27) of the Small Business Act, as

13 added by this section—

14 (A) provide maximum flexibility in the es15 tablishment of terms and conditions of loans

16 originated under the loan program so that such

17 loans may be structured in a manner that en18 hances the ability of the applicant to repay the

19 debt;

20 (B) if appropriate to facilitate repayment,

21 establish a moratorium on principal payments

22 under the loan program for up to 1 year begin23 ning on the date of the origination of the loan;

24 (C) provide that any reasonable doubts re25 garding a loan applicant’s ability to service the
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1 debt be resolved in favor of the loan applicant;

2 and

3 (D) authorize an eligible lender (as defined

4 in section 7(a)(27)(A) of the Small Business

5 Act, as added by this section) to process a loan

6 under the loan program in accordance with the

7 requirements applicable to loans originated

8 under another loan program established pursu9 ant to section 7(a) of the Small Business Act

10 (including the general business loan program,

11 the Preferred Lender Program, the Certified

12 Lender Program, the Low Documentation Loan

13 Program, and the SBAExpress Pilot Program),

14 if—

15 (i) the eligible lender is eligible to par16 ticipate in such other loan program; and

17 (ii) the terms of the loan, including

18 the principal amount of the loan, are con19 sistent with the requirements applicable to

20 loans originated under such other loan pro21 gram.

22 (c) REPEAL.—Effective on December 31, 2000, this

23 section and the amendments made by this section are

24 repealed.
Calendar No. 18

106TH CONGRESS

1ST SESSION S. 314

[Report No. 106–5]

A BILL

To provide for a loan guarantee program to address

ness concerns, and for other purposes.the Year 2000 computer problems of small busiFEBRUARY 23, 1999

Reported without amendment