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The government is taking steps to provide banks with £4 billion to lend to small businesses.

Alistair Darling and Lord Mandelson are today meeting with the head of the European Investment Bank (EIB) which is providing the cash which banks can borrow in order to lend to small businesses.

Across Europe the EIB is making £24 billion available – of which £4 billion will be available to UK banks.

Over the last year British banks lent small businesses around £5.7 billion.

"We need to make sure that despite the global credit crunch, they have access to the loans and capital they need to help their businesses grow and develop," the chancellor said.

Mr Darling also stated he was concerned about small businesses not being given access to funds since the financial crisis.

He told BBC Radio 4's Today programme: "I am very concerned when I hear from businesses that they are finding credit lines they had are being reduced or they have been refused money.

"There are two things here; there will be cases where a business might have been a good prospect 12 months ago, but the banks say for perfectly understandable reasons the business is not working.

"But there are cases where I am concerned that a business that is otherwise a good going concern cannot get fund available to it."

He added Lord Mandelson was setting up a group with banks to stop lenders that are cutting credit to small businesses unfairly.

As a part of the government's bank recapitalisation deal, banks were required to increase the availability of loans to 2007 levels.

However, Mr Darling stated he did not want a return to irresponsible lending.

Last night in a speech, the chancellor said: "Central to the recovery is lending by banks to business, particularly small businesses.

"We've working with the banks to endure continued access to credit at competitive prices."