Congress supports Y2K relief for small businesses
Scott Parrish, of Parrish-Keith-Simmons, has concerns about the government's plan to help small firms with Y2K problems.
By Industrial Distribution Staff -- Industrial Distribution, 5/1/1999
Washington, D.C.--Small distributors who are pushing the envelope regarding Y2K compliance can look forward to some assistance from Uncle Sam.At press time, President Clinton was expected to sign into law The Small Business Year 2000 Readiness Act in April. The bill, which Congress passed unanimously in March, establishes a short-term loan program to help small businesses cover the cost of Y2K problems. It does not, however, address distributors' greater desire for product liability protection from litigation related to Y2K business disruptions.
The bill authorizes the Small Business Administration to guarantee loans of up to $1 million under the Y2K program and to establish guidelines for the program no later than 30 days after enactment. The loans will be provided by more than 6,000 private financial institutions. Small businesses may use the loans to correct their own Y2K problems and recover from economic injuries resulting from Y2K problems.
If all goes as planned, small distributors will be able to contact their local SBA office and get a list of participating lenders by the end of this month.
This sudden cash flow may be helpful for the 55 percent of distributors who were not yet compliant at the end of 1998, according to an exclusive Industrial Distribution survey reported in February. Of those distributors, 39 percent did not expect to be compliant until June. The issue is further complicated because, at the time of the survey, only 40 percent of respondents had begun asking their trading partners and third-party partners for verification of their Y2K compliance.
The bill is tailor-made for small businesses that are either just now realizing the seriousness of the Y2K issue or have been unable to afford the necessary hardware and software upgrades.
"I have heard of countless groups that are ready to take advantage of this program to help pay for costly Y2K upgrades," says House Small Business Committee Chairman Jim Talent (R-Mo.). "I have heard from several distributors in my district that the potential impact on their computers is immense and the cost of compliance can range upwards of $25,000. These loans, from established SBA lenders, will help pay for these upgrades to ensure business is not disrupted.
"This bill will offer plenty of time for small businesses to hire a computer consultant, upgrade existing systems, or run tests on the impact of Y2K. This program will make a difference," Talent says.
Scott Parrish, president Parrish-Keith-Simmons in Nashville, Tenn., is less enthusiastic about the bill. Parrish, who is a member of the Industrial Distribution Assn.'s Small Distributor Task Force, says "businesses of any size should have been aware of the Y2K implications for years now and the issue should have been addressed. What would be of concern to me is that this SBA program may just be a way for people to buy computers with favorable financing and that it can lend itself to a lot of abuses."
Bill Jatho, president of Mechanics Tool & Supply in Oakland, Calif., thinks the program is a good idea to help those small businesses that may be hurt by software providers or business partners who falsely claim Y2K compliancy, and those that have been negligent about upgrading their computer systems. Jatho is also a member of the Small Distributor Task Force.
But a far more important issue for small distributors, both Jatho and Parrish say, is the issue of product liability protection.
"We've been bombarded for a year now by customers asking us to explain what we've done to address the Y2K problem and to basically guarantee that we won't have any downtime related to that," Parrish says. "And we have to be very careful about agreeing to those kinds of demands because if we're passing on products, we could be held liable for a product failure or missed delivery date that is not really our causation. That scares the daylights out of me.
"I feel like this issue has been out there for a long time and I'm not sure that the government needs to save us from ourselves," Parrish says. "But I think that they should save us from catastrophic litigation that could arise and issues like product malfunctions that really concern me."
Jatho agrees that product liability litigation has the potential to be far more costly than achieving in-house Y2K compliance.
Whether or not small distributors can expect to see any liability protection coming out of Washington any time soon is uncertain.
"Industrial distributors are not alone in their concern about Y2K liability," Talent says. "There are several bills currently pending in Congress that would limit the liability; however, they are very controversial and it is unclear whether something will pass before the millennium. However, there will be vigilant oversight of the liability issue and if there are any abuses, Congress will act swiftly to curb punitive actions."
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