Britain will use 95 million pounds from a regional growth fund to help small businesses that are struggling to get finance for investment, Prime Minister David Cameron will say on Thursday.
The money will be paid out in grants to support small and medium-sized firms that are planning to invest in new capital assets, such as plant and machinery, and create new jobs, but cannot get normal bank finance.
According to advance excerpts released by his office, Cameron will say in a speech later on Thursday that entrepreneurs often needed only a small investment, of perhaps 30,000 pounds, to get those businesses going, create the jobs, kick-start the innovation and exports that we need.
The grants, which will supplement bank loans made on commercial terms, could unlock 500 million pounds of investment by small and medium sized firms, Cameron will say.
The funding could create 4,000 jobs, the government said.
The new scheme is one of a series of new measures that Cameron will set out to help small businesses grow and create jobs, export to new markets, secure finance and cut red tape, his office said.
The coalition government is under pressure to boost lackluster growth, as well as to help small businesses.
The grants will be administered by majority state-owned bank RBS and its NatWest unit and by HSBC. The banks will not earn any fees for administering the scheme.
The money will come from the existing 1.4 billion pound Regional Growth Fund. The new scheme is aimed particularly at boosting investment by small firms in regions that are over-dependent on the public sector, the government says.
Ever since the credit crunch hit, many small firms have complained that they find it difficult to get finance as banks tightened lending criteria.
Britain's biggest banks struck a deal with the government to boost lending earlier this year in return for legislative restraint.
The finance ministry said on Wednesday that British banks must do more to boost credit to smaller firms, after data showed that the five largest lenders were on track to meet their overall lending targets, but were slightly below target in lending to small firms.
Finance minister George Osborne has already announced a scheme of credit easing to boost lending to small firms.
(Reporting by Adrian Croft; editing by Bob Burgdorfer)