Originally only open to those aged 18-24 years old, the scheme offers business start-ups loans of £2,500. To cater for the wider age group, the funding available is increasing from £82m to £112m.
But the scheme, which was announced at the end of May, has only lent out £1.5m so far. The loans have to be repaid within five years, with interest will be charged at the level of RPI plus 3%.
The Start-up Loans Company (SLC) runs the scheme, chaired by TV Dragon James Caan. The SLC said the relatively slow start was due to the time taken to set up local partnerships, and that the pace of loans had picked up during December.
The target is to lend all £112m by April 2015.
The expansion is due to be announced by prime minister David Cameron at an event in Preston later today. "Start-up loans are an important part of my mission to back aspiration, and all those young people who want to work hard and get on in life, so this country competes and thrives in the global race," he will say.
"They are a great way to help this next generation of entrepreneurs get the financial help - and the confidence - to turn that spark of an idea into a growing, thriving business."
More than 3,000 people have applied for the loans so far, but in order to meet the target, 45,000 entrepreneurs will have to take out a loan through the scheme.
Labour has criticised the way the scheme has been implemented. Shadow business secretary Chuka Umunna said, "With our economy flat-lining it's essential that initiatives like the Start-up Loans scheme are delivered effectively if they are to provide real opportunities for our young entrepreneurs.
"That's why it was disappointing that figures released at the end of last year suggested delivery of this scheme, like so many others from this government, was not living up to David Cameron's rhetoric."
The move has been widely welcome by businesses groups. Ben Dowd, O2 business director, said, “Today’s announcement is a positive step towards generating future growth. It’s clear from our own research, which showed that almost a third of 16-24 year olds would like to start their own business, that young people’s appetite is undiminished by the recession.
"However, the government alone cannot unlock Britain’s full entrepreneurial potential. Innovative government led schemes that create pathways into entrepreneurialism are extremely welcome, but we must not ignore the role large established firms can play to ensure that start-ups stay the course. Whether through mentoring, funding or training, large businesses can help catalyse the success of young start-ups and SMEs and re-ignite our economic recovery.”