The U.S. Senate's Mar. 2 vote approving aid to small businesses for Year 2000 fixes had that progressive, compassionate feel: The vote was 99-0 to guarantee $500 million in emergency loans to help small businesses pay for their millennial computer repairs. Wielding seafaring metaphors, Senator Christopher Dodd (D-Conn.) compared the legislation to "the beam from a lighthouse," helping small businesses "weather the Y2K storm and make it safely to port."

Unfortunately, this magnanimous gesture may miss the boat. That's because small businesses that need the money must have it soon if they're to make repairs in time. And the stately pace at which Washington is moving isn't encouraging.

Passage isn't considered a problem -- an identical bill to the Senate's is widely expected to sail through the House of Representatives. Still, it could be mid-April before the bill becomes law, according to a House Small Business Committee spokesperson. Then, the Small Business Administration will have to establish procedures for getting the money to borrowers. That could take "a matter of weeks or a matter of months," according to the agency. Couple that with the time it takes to apply for and get a loan approved, and it may be May or June before small-business owners get their hands on any cash.

NO TIME TO LOSE. Many small businesses may be able to fix their systems in short order. Still, May or June could prove too late for some small concerns with large corporate clients. Many corporations have threatened to cut off suppliers by June -- or earlier -- if they can't show they're adequately protected against the Y2k bug. Why so early? Because Y2K remediation isn't really complete until all the systems in a given supply chain are tested together, says Debra Jones, North Carolina's Y2K director. Jones says she's "extremely excited" about the loan program but adds that her state's small companies "don't have any time to lose."

"Businesses should have started a long time ago," adds Dave Fletcher, Utah's Y2K coordinator. "I would think they would want to be 60% complete with their project [by now], especially if they are a business of any size."

Paul Cooksey, senior counsel of the Senate Small Business Committee, defends the proposal, saying the bill is being shuttled through "pretty fast for Congress." If it's made into law by mid-April, it will "still [be] out early enough," he says.

The Senate passed a version of the bill last year, but the legislation didn't clear the House. Public and legislator attitudes toward Y2K have changed dramatically since then, however, as evidenced by strong bipartisan interest during the Mar. 2 "Y2K Day" in the Senate. Both Democrats and Republicans sponsored the loan proposal, officially called the "Small Business Year 2000 Readiness Act."

The act would essentially extend the SBA's flagship 7(a) loan program, which guaranteed more than $9 billion to 42,268 individual businesses last year. The crucial difference is that it would allow the 6,000-plus certified SBA lenders to make riskier-than-usual investments. Currently, loans of less than $100,000 are guaranteed up to 80%, and loans of more than $100,000 are guaranteed up to 75%. The plan would raise the guarantees to 85% and 90%, respectively, and would allow borrowers to delay principal payments until one year after the loan begins. The Congressional Budget Office estimates that the government would eventually end up paying some $20 million in loan defaults on $500 million in Y2K loans.

Setting precise lending terms -- defining, for instance, what constitutes a valid Y2K purpose -- could prove an administrative hurdle for the SBA, spokesperson Mike Stamler says. And even with generous loan guarantees, banks could offer resistance. "Normally, when you make a loan, you do something that adds value," says Stamler. "This is maintaining the value of a business. So you do look at the loan differently."

Utah's Fletcher says small businesses will take any help they can get. "I think it's better than nothing," he says of the loan program. "Everybody involved needs to push to get small business to do much as possible." When it comes to getting Congress to turn loose the promised funds, however, small businesses may need to do some pushing of their own.

By Dennis Berman in New York
dennis_berman@businessweek.com

To: TECHNOLOGY