Trade and Industry Secretary Alan Johnson today launched a £multi-million government scheme to boost innovation, jobs and growth for small and medium sized businesses in the UK.

The scheme establishes Enterprise Capital Funds (ECFs) and will provide Government match funding for business angels and venture capitalists to help small and medium sized businesses bridge the equity gap and reach their full productive potential.

Johnson said: "Entrepreneurship and innovation are cornerstones of competitiveness in today's global economy, but many businesses with genuine potential fall at the equity gap hurdle. Enterprise Capital funds will help to tackle this so that sound British businesses are able to progress boosting economic growth and job creation across the UK."

Up to £200 million will be made available via ECFs, which are designed to be commercial funds, investing a combination of private and public money in small high-growth businesses that are seeking up to £2m of equity finance.

Prospective ECF fund managers have eight weeks to prepare detailed bids, showing how they will target their activities towards small and medium sized businesses in the equity gap. They will need to demonstrate their skill and experience in identifying and helping such companies recognise their potential.

Bids will be assessed by the Capital for Enterprise Board, an independent body of industry experts appointed by the Small Business Service, who will make recommendations to the government.

Successful bidders will be able to use the government scheme to attract private capital. The government will provide up to twice the amount of private money committed to each fund, taking a modest share of the profit.

David Quysner, chairman of the Capital for Enterprise Board said: "A great deal of consultation and groundwork has gone into developing this initiative. ECFs will fulfil a genuine need by addressing a market gap in the availability of equity finance. I am pleased to be involved at an early stage in this innovative programme, which I am confident can make an important contribution to the availability of funding for SMEs."

The ECFs will operate as commercial Venture Capital funds with the objective of investing in enterprises that will make positive financial returns. It is envisaged that if successful, the government will launch further funds in the future.

The SBS has published detailed guidance to assist those wishing to bid for these funds. Interested parties can download the guidance from http://www.sbs.gov.uk/financegap