Business and enterprise minister Mark Prisk has outlined reforms to the Enterprise Finance Guarantee (EFG) scheme to support micro-lending to small business.

Speaking to the Community Development Finance Association (CDFA), Prisk announced he is issuing guidance to community development finance institutions (CDFIs) to enable greater use of current support, and directly invited CDFIs to bid to the Regional Growth Fund.

Prisk said that the government is to increase access to the scheme (which guarantees 75% of a loan to small businesses) for CDFIs, which typically make more risky investments than other lenders. From April, the government will pay out on defaults of up to 20% of each lender’s EFG portfolio on the first £1m of loans, up on the current 13%.

He further called on CDFIs to bid for funding from the Regional Growth Fund, which will target regions that are too dependent on the public sector and also invited CDFIs to work with government as it develops the Big Society Bank.

Prisk said: “I want to encourage people from all backgrounds to start their own business. CDFIs are extremely important in supporting business in communities that need a boost in enterprise and economic growth.

“With changes to the EFG and our continued work on the Big Society Bank and Regional Growth Fund, new opportunities are opening up for CDFIs to increase their loan base. CDFIs are well positioned to make strong bids for RGF support in line with the objectives of the fund.”