Mayor Boris Johnson unveiled the mayor's Economic Recovery Action Plan last week, which is designed to bridge the funding gap many small businesses are experiencing in the credit crunch.

Designed as a "last resort", the loans are available to any business that has exhausted all traditional funding avenues, but has a "detailed business plan".

The mayor said that the fund was part of his attempts to "do everything in my power to help the capital's small- and medium-sized businesses during these tough times".

The new fund, which has been launched in partnership with the London Development Agency, will provide established businesses with loans of up to £50,000 for up to five years.

London Development Agency chief executive Peter Rogers said: "As London’s strategic economic organisation, we know that many of London's businesses are facing difficult times.

"This new loan fund – part of the mayor’s Economic Recovery Action Plan – will help firms get access to funds that could make all the difference to their success."