The boom in Fairfax County's business growth in the past decade generally has been linked to an influx of major corporations or their relocations of some divisions to the county.

Part of that county's economic growth, like that of other suburban Washington jurisdictions, also can be attributed to a steady flow of businesses from the District in the past 10 years.

However, small businesses --those with fewer than 20 employes--are still regarded as the backbone of the county's economic growth. Fairfax County business patterns show that roughly 84 percent of the firms in the county are in the small-business category.

Increasingly, the biggest problem faced by small businesses in the county and in general is their inability to absorb high interest rates on badly needed loans. Escalating interest rates have had a "serious, nagative impact" on small-business borrowers, the administrator of the Small Business Administration observed recently.

"For small businesses, it's very difficult to find long-term, fixed-asset financing," remarked Peter Stefanou, a director of the Fairfax County Chamber of Commerce.

Having to rely on short-term financing, small businesses can't plan adequately for expansion, Stefanou said. "Unless you are a large company which can issue debentures, for example, you're pretty well locked out" of the long-term financing market, said Stefanou, who is chairman of the chamber's small-business committee.

However, help is on the way for owners of small businesses in Fairfax County.

After considerable study of the problems of small businesses in the county, directors of the chamber approved a proposal at their December meeting calling for the organization to establish and sponsor a local development corporation.

The county's LDC will function as a conduit for much-needed financing for eligible small businesses that require funds to expand.

SBA-certified LDCs have been formed in about 150 communities since the program was established in 1980. Under the program, which began with an amendment to the SBA Investment Act, the agency certifies development companies to provide long-term, fixed-asset financing to small businesses.

Its intent is to strengthen local economic development by encouraging private-sector involvement in business expansion and creation of jobs.

The so-called 503 program enables an LDC to sell debentures tied to a small firm and guranteed by the SBA.

Generally, most for-profit businesses with a net worth of less than $6 million and an average after-tax profit of less than $2 million are eligible to participate in the program. Financial institutions, gambling concerns and media-related concerns are ineligible.

Loans obtained under the joint private- and federal-sector financing program are available for up to 25 years for land acquisition, construction, expansion or fixed equipment.

"Given those parameters, we would say that well over 90 percent of the businesses in Fairfax County qualify," Stefanou said.

A key element of the program is its limited thrust, which provides financing for established firms, assuring a measure of continuity in a community's economic development. Entrepreneurs seeking loans to start businesses are ineligible for LDC loans.

In the past, industrial revenue bonds served as a vehicle for financing expansion programs of some small businesses. However, a sour economy has all but dried up that source. Stefanou said "most banks have gotten out of the IRB market."

"We chatted with a few banks, and only one major bank in the area said it was still active in the IRB market," he added.

The Fairfax County Local Development Corp. is expected to be certified by the SBA by the end of April, and it probably will submit its first loan package some time in July.

The LDC will issue bonds guaranteed by the SBA and funded by the Federal Financing Bank. Typically, a borrower would put up a 10 percent equity, and a private lending institution would make a first mortgage loan of 50 percent of the amount to be financed. The balance of the loan would be provided by the LDC, which would have a subordinated position to the private lender.

Maximum level of funding for the LDC loan, or second mortgage, is $500,000 for each applicant. Financing is offered at a fixed rate, based on a small percentage above 15- to 25-year Treasury bond rates.

"We feel that the LDC will foster increased economic development in Fairfax County and increase employment," Stefanou said.

The Fairfax County LDC will be the first in Northern Virginia. The District's Office of Business and Economic Development received its SBA 503 certification just over a year ago.

Although it may be several weeks before the Fairfax County LDC receives certification, Stefanou expressed confidence that the newly formed quasi-public corporation will "allow the local business community to work hand in hand with financial institutions in helping small businesses."