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. 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.