States News Service, founded nine years ago by two reporters to provide supplementary coverage of the impact of federal decision-making on cities and states, may go out of business soon if no rescuer can be found to provide the capital the news service needs.

If we don't get some serious help from one of the leaders in the industry, we're not going to make it," said Leland J. Schwartz, the founder, owner and chief executive officer of SNS. "we're facing going out of business if we don't get the right help from the right place."

Schwartz said a $500,000 investment "would be enough to give States News Service a shot at becoming one of the strongest supplements in the industry" and to help overcome problems such as undercapitalization and no sales staff.

In recent months the financially troubled news service, which supplies Washington coverage for some 100 newspapers, has sought aid and investment from a number of sources, including The Washington Post and The New York Times, Schwartz said. "For all practical purposes, the cure is not going to come from either of those companies," Schwartz said.

Schwartz also said that no deal had been struck with Network News Inc., a feature sydication headed by Milchael McDonald Mooney, the Washington editor of Harper's magazine. Network News had an option to buy the service, but the option has expired. Schwartz said he objected to what he described as Network News' plans to regionalize the news service's coverage, which he said would result in worse coverage.

According to Schwartz, the company was never well-capitalized and got further into debt when it installed a computer system to improve the speed and reliability of transmissions to subscriber newspapers. Basically, SNS provides one reporter to track developments in each state, in most cases supplementing subscribers' own Washington bureaus.