Small businesses on both sides of the U.S.-Mexico border are being ushered by

financial supporters into the emerging North American market that Nafta represents at a record pace.

Public sector and private bank backing of small business development aimed at exports is increasing to the point that there is something of a race between U.S. and Mexican entities to prepare their businesses more rapidly. The North American free-trade agreement promises a more profound impact on Mexican businesses than the 1989 U.S.-Canada Free Trade Agreement had on Canadian businesses, however.Most of Mexico's 400,000 small- and medium-sized businesses are unprepared for free trade, since they have operated under government protection against imports. In practical terms, financing has been as great, if not a greater impediment for small Mexican businesses than for small U.S. companies when it comes to preparation for export. Accordingly, Mexico's state development bank, Nacional Financiera S.A., is sharpening its focus on small business.

"Nacional Financiera('s) . . . primary objective is, on one hand, to promote the modernization of the nation's productive plant, and on the other, to accord top priority to micro-, small- and medium-sized businesses," said Oscar Espinosa Villarreal, the bank's general manager, in a recent mission statement.

But, despite a three-year-old Mexican government program to help finance the globalization preparations of small businesses, only some 80,000 companies had received new loans by the end of 1992, according to Jesus Cevallos, president of the Confederacion de Camaras Industriales de los Estados Unidos Mexicanos, or Concamin, the umbrella organization for Mexican industrial associations.

Also, thanks to Mexico's now dollar-flush federal coffers and to multilateral lenders, there will be "no problem" in financing the remaining small borrowers over the next few years, Mr. Cevallos said.

The Inter-American Development Bank, for example, approved a $250 million loan to Mexico's Nacional Financiera S.A., or Nafin, in November 1992 for reloan to small- and mid-sized businesses. Nafin, the state development bank, recently reoriented its activities primarily to serve small businesses. The 20-year IDB credit line - which will be matched by Nafin with another $250 million - enables companies to restructure, as well as finance export trade.

U.S. government financial support for small businesses, while available for billions of dollars worth of business, seems more oriented to short-term trade finance and, some critics say, more prone to paperwork bottlenecks.

The U.S. Small Business Administration and the U.S. Export-Import Bank have billions in funds available for export finance and insurance, but some assistance from state-operated export finance offices or private banks often is necessary to secure a federal loan. As a result, state offices are increasing their activity to help small companies hone business plans and fill out loan forms, in many cases with pre-approval authorization from the federal entities.

At the same time, more states are opening offices in Mexico to help these exporters target markets more efficiently. A year ago, there were only half a dozen states with either full offices or representative offices in Mexico City. Today, there are more than a dozen, according to Scott Welle, an intern at the California Trade and Commerce Agency, a pioneer office among other state peers.

"We receive about 350 trade inquiries daily, with 60 percent of the calls coming from Californian exporters and 40 percent of the calls from Mexican importers," Mr. Welle said.

Overall, California is the second-largest state exporter to Mexico, having shipped $6.6 billion worth of goods to Mexico last year, following Texas with $18.8 billion, Mr. Welle said. States that have followed California's and Texas' export promotions lead into Mexico include: Arizona, Connecticut, Georgia, Illinois, Indiana, Kansas, Louisiana, Massachusetts, Michigan, Missouri, New Mexico and Utah.

More are expected to open offices as the Nafta debate intensifies. Without Nafta, U.S. exports to Mexico have risen over the past five years to $40.6 billion in 1992 from $14.6 billion in 1987, according to the U.S. Commerce Department.

Indeed, Mexico is not waiting for Nafta to establish more business ties with U.S. businesses.

"Frequently, state trade missions receive an audience with Mexican President Carlos Salinas de Gortari if the governor is present," confirmed Caroline Robbins, coordinator of international business development for Washington's National Association of State Development Agencies.

Mexico's banks are so active in financing small company globalization efforts, that U.S. companies can now find financing from Mexican sources. This phenomenon has yielded trouble for Mexico, though, since the U.S. Congress is wary of job losses through plant transfers to Mexico.

Earlier this year, Nafin, for example, was forced to withdraw its $3.7 million support of a private fund that targeted U.S. companies for transfer to the state of Yucatan, following congressional complaints to U.S. Trade Representative Mickey Kantor.