The EFG guarantees up to 75% of the value of loans to SMEs, with lenders covering the remaining 25%.

In addition, the government has announced a £400m extension to Enterprise Capital Funds, part of the BIS-run Business Bank, which invests in fast-growing SMEs that are too small to attract VC or PE backing.

Meanwhile, the Funding for Lending Scheme (FLS) has been extended for an additional year, to January 2016, under the existing terms whereby loans to SMEs are incentivised by the Bank of England (BoE).

Under the FLS, banks can draw funds from the BoE at very low interest rates (0.25%) in exchange for lending money to SMEs; lenders are able to draw £5 from the FLS for every £1 of net lending to SMEs.

The chancellor George Osborne said: "The government's long-term economic plan is working with the Funding for Lending Scheme playing a vital role in supporting the recovery. Now that credit conditions for households and large businesses have improved, it is right that we focus the scheme's firepower on small businesses, which are the lifeblood of our economy."

BoE governor Mark Carney said: "By providing a backstop for funding for banks, the FLS has supported access to credit across the economy during an exceptional period.

"As access to credit has returned to the mortgage market and large corporations, the scheme has tapered appropriately. The extension announced today concentrates the FLS on the one area where support remains warranted: the supply of credit to SMEs."

The FLS was launched in 2012 and refocused to support lending to SMEs at the end of 2013 after BoE figures revealed that financial institutions that had drawn money from the scheme had reduced net lending to SMEs.

The scheme was criticised for being used to prop up mortgage lending and lending to large corporations. The latest figures from the BoE show lenders that have drawn money under the scheme cut net lending to SMEs by £128m in the three months to September.