A £5million loan scheme for businesses was today announced by First Minister Alex Salmond.

He unveiled plans for the East of Scotland Investment Fund during an address to the annual conference of the Federation of Small Businesses (FSB) in Aberdeen.

The fund will offer loans of up to £50,000 to firms and the Government say it could create 1,300 new jobs.

Mr Salmond said: "This new initiative will help ambitious companies and entrepreneurs get the finance needed to realise their potential and, in turn, contribute to Scotland’s economic recovery and success.

"This new fund will build on the package of measures this Government has successfully introduced to support our business community during these challenging economic times."

IN DETAIL

• Alex Salmond speech to the  annual conference of the Federation of Small Businesses
• Peter Mandelson speech to the annual conference of the Federation of Small Businesses

Similar loan schemes already exist in the west, south and Highland areas of Scotland through the West of Scotland Loan Fund and The Opportunity Fund.

Today’s initiative will be supported by £2million in European Regional Development Funding (ERDF) and £3million of funding from the 12 local authorities taking part.

The councils involved are Fife, Aberdeen, Angus, Edinburgh, Clackmannanshire, Dundee, Falkirk, Midlothian, Moray, Perth and Kinross, Stirling and West Lothian.

About 430 firms could benefit from the scheme and the Government says it has the potential to generate increased turnover of £34.56million in small and medium-sized enterprises.

"The Scottish Government is doing all we can to ensure the economy recovers strongly by harnessing all our economic levers to support businesses and to create and safeguard jobs across Scotland," Mr Salmond added.

"This new initiative will reinforce Scotland’s reputation as a first-class destination to do business and ensure small businesses can access the finance required to be at the forefront of their field."

FSB Scottish policy convener Andy Willox said access to affordable finance is one of the top issues being raised by firms at the conference.

He added: "Anything which broadens the range of finance options available to small businesses and gives some real competition to the big high street banks will help us get on with the job of leading Scotland back to growth."

Mr Salmond was among the keynote speakers at today’s conference along with Business Secretary Lord Mandelson and shadow Chancellor George Osborne.