Unveiled in 2009, the EFG is a loan guarantee scheme whereby the government pledged at the time it was launched to lend £1.3bn of guarantees to banks lending to companies with a turnover of up to £25m and that were unable to obtain loans through traditional means.

Since its launch the scheme has been criticised for being ineffective and not getting through to those companies that need it. In response, over the last 12 months the Department for Business, Innovation and Skills (BIS), which administers the scheme, has changed the eligibility criteria to try to improve its performance.

Adjustments include increasing company turnover to £41m, replacing the £1m per business lifetime scheme limit with a rolling £1m outstanding limit and raising the level from 13% to 20% of the lenders’ annual lending portfolio to which the government guarantee applies.

Additionally business minister Michael Fallon wrote to all subscribed lenders, of which there are more than 40, urging them to improve lending levels and publicly named those that were failing to make full use of the scheme.

According to new figures the combined lending of all those participating in the scheme rose from £71.6m in Q3 2012/13 to £91.7m in Q4, the highest level since September 2011. The total number of loans offered increased from 767 in Q3 to 885 in Q4. However a year-on-year comparison showed that lending was up just £7.2m on Q4 2011/2012 with 92 more offers.

Bank of Scotland (BoS) and Santander, which were among the worst performers last year, reported “significant increases” in lending through EFG, offering 20 and 31 loans respectively in Q4 2012/13 compared to just seven and one in the same period last year. This still compares poorly however to the likes of HSBC, Lloyds and Barclays whose loan offers during those periods were in the hundreds.

Fallon said the increase in lending through the EFG that banks were reporting must remain steady: “This is an important step towards increasing the finance small firms can access. Some banks are working harder, and they should be recognised for that.

“It’s important this isn’t a one-off. Banks must continue to improve their use of EFG. Access to finance is a crucial issue to SMEs and economic growth will depend on businesses having the certainty that banks are lending.

“This increase needs to be maintained to improve business confidence and demonstrate that responsible lending can still take place.”

Since its launch total EFG lending stands at £2.14bn with 20,903 SMEs having been offered loans.