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The government will give loans to businesses via regional development agencies (RDAs), as banks are still not lending to companies, a report in the Times says.

According to the newspaper, agencies across the country will be able to issue loans of up to £250,000 to small companies.

The first such scheme has been approved by business secretary Lord Mandelson, who has allocated £4 million to Advantage West Midlands for it to pass on to local firms.

Government ministers are urging money from the RDAs should only go to 'viable' companies which are going to be able to survive the economic downturn.

The newspaper reports ministers are encouraging other RDAs to apply for funds to be used in this way.

A total budget of £2 billion has been allocated to the agencies, for use around the country.

Business owners have also been asked by the government to provide information on how the credit crunch is affecting them and is seeking information from industry bodies like the Confederation of British Industry, the publication reports.

The Federation of Small Businesses has previously suggested the £4 billion from the European Investment Bank should be allocated to firms via RDAs.

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