Stung by criticism that banks are not lending enough to hard-pressed businesses hit by the credit crunch, a Big Four group has unveiled a £250million fund for firms across Kent and the South East.

The Royal Bank of Scotland and NatWest, now 70 per cent owned by the taxpayer, is making £3 billion available nationwide to small and medium enterprises (SMEs).

Bank bosses in 12 regions based on development agency areas - SEEDA in the south east - have each been allocated £250m for a package of financial products, and told to fully allocate the cash this year.

In addition to providing traditional debt finance, the new funds - available from Thursday - will offer businesses the opportunity to tap other avenues to help them manage their capital and cashflow through the current economic downturn.

RBS promised that the locally-run fund would offer customers a wide range of financial support including flexible business loans to allow customers to postpone capital repayments.

The fund would also offer invoice finance to guarantee debtor payment, release cash against assets, and short term trade finance to keep imports and exports flowing.

Jonathan Shaw, MP for Chatham and Aylesford and minister for the south east, welcomed the RBS scheme.

"Small and medium sized enterprises are the lifeline of our economy (there are more than 740,000 of them in the South East) and it is critical that they are able to access the finance they need to survive and grow," he said.

"I welcome this move that will ensure that lending to businesses is stimulated at branch level and hope that other lenders will take similar steps to ensure that their front-line managers are incentives to lend to SMEs."

SEEDA chief executive Pam Alexander said many small businesses had been struggling to get financial support from the banks.

"We welcome this announcement and anticipate that the move will act as an economic stimulus, helping to boost business confidence. We very much hope that other banks will follow suit and take similar steps in the near future."

Greg Jones, managing director of NatWest and RBS Business and Commercial Banking for the South East, added: "SMEs form the backbone of this economy and the regional funds highlight our commitment to supporting and reassuring businesses through the downturn."

The funding package offers small business loans at 5.9 per cent APR over £15,000, with rates from 7.9 per cent APR for loans between £1,000 and £15,000. The reduced rates are available for a limited period.

European Investment Bank funding from another £250m pot offers a reduced price business term loan, with a trading business loan offering a five-year fixed or variable rate finance.