The package includes an extension of the Enterprise Finance Guarantee scheme, which the Department for Business, Innovation and Skills (Bis) said would make an extra £2 billion available to SMEs.
The scheme was due to end in March 2011, and will now continue for the next four years.
Under the scheme, the Government underwrites 75 per cent of the value of loans from commercial banks to provide working capital to small companies without a credit history or collateral. It is expected to help 6,000 SMEs each year.
Also among today’s measures, a further £200 million was made available over the next four years to the Enterprise Capital Fund, which provides equity finance to SMEs with potential for high growth.
The Government today appointed Lord Young as enterprise advisor to the Prime Minister with a remit to propose new ways of encouraging business start-ups.
David Cameron believes SMEs’ contribution to the economy is not recognised, the Financial Times reported today. In a letter to Lord Young, he called for a reversal of the state’s "institutional bias" against small business, which he believes has increased over the years.
In the letter to Young, Cameron called for a "brutally honest report" that will open opportunities and lift the bureaucratic burden on entrepreneurs.
According to Bis, SMEs provide 60 per cent of jobs and half of GDP, but just 20 per cent expand their workforce each year.
Today’s announcement also includes measures to encourage small businesses to apply for government contracts, and to allow social tenants to start businesses in their own homes.
Jobcentre Plus will run a campaign across Jobcentres later this month to support unemployed people to set up businesses.