Two Quad-Cities are economic-development groups launched a new bond financing program Friday for small and medium-sized projects that would spark job growth in Henry, Mercer and Rock Island counties.

Officials of the Quad Cities Regional Economic Development Authority and the Quad City Development Group said the new Composite Bond Assistance Program, or COBA, would reduce interest-rate financing for companies' expansions.

QCREDA provides long term, tax-free bond financing for manufacturing and other projects of $2 million to $10 million or more. COBA would pool several companies' smaller projects if $500,000 to $2 million each to provide the same tax-exempt status and save companies 2 to 3 percent below conventional interest-rate financing.

Each applicant would obtain a bank's letter of credit to back the project, QCREDA chairman Ken Schloemer said.

"The benefit of this program is that it provides a marriage of sorts between QCREDA and a local Quad-City bank to provide credit enhancement for the bond," he said.

A number of local companies would like to obtain bond-financing for their projects but have had to scale back their projects or shelve them altogether because of the cost of conventional financing, development-group president John Gardner said.

He commended QCREDA for initiating the new product to help the Illinois Quad-Cities area grow.

About a dozen companies have contacted QCREDA for bond financing since December, but most of the projects were under $1.2 million and were too small to incur the costs of traditional bond-financing, QCREDA executive director Andrew Hamilton said.

No other economic-development authority in Illinois has this type of composite bond-financing program. The Illinois Development Finance Authority had such a program but dropped it 10 years ago, Mr. Hamilton said.

COBA charges a $1,000 non-refundable application fee and certain other closing costs. Banc One Capital Corp. will place the bonds by selling them to institutional investors, Mr. Hamilton said.

Each composite bond would be in the range of $10 million to $20 million and finance five to ten companies' projects, he said.

COBA could be used to buy land or new equipment or to purchase or construct buildings. The program is open to manufacturer, not-for-profit organizations and certain solid waste projects.