Small and medium enterprises (SMEs) can now apply for a £200,000 interest-free Energy Efficiency loan from the Carbon Trust in 2008/09, double the £100,000 limit of 2007/08, to help fund larger energy saving projects.

The trust has decided to increase its total loan pot by 45 per cent to £31m for 2008/09 in response to the current economic climate limiting SME's access to alternative funding. The new scheme is expected to generate 20 per cent more carbon and energy savings this year than if the existing limit was maintained.

Hugh Jones, solutions director at the Carbon Trust, said: "We know that SMEs want to play their part in tackling climate change and reduce their energy costs at the same time, but in the current economic climate, the tighter credit conditions are making it harder for small businesses to find alternative sources of funding.

"We know that some companies found that the £100,000 limit made it hard for them to finance ambitious projects £200,000 loans pave the way for companies to take on such projects and significantly reduce both their carbon emissions and their energy bills, which in turn will enable them to reduce operational costs and become more competitive."

The loans are unsecured, interest-free and will be repayable over four years, enabling companies to cut their energy bills and their carbon footprint more easily.

David Boomer, head of energy efficiency and climate change at the Institute of Directors, said: "Even at this time of economic uncertainty it is still vital that businesses continue to look for opportunities to invest in more energy efficient equipment and thereby reduce their carbon emissions. The institute of Directors would strongly encourage businesses to make use of this opportunity and to work closely with the Carbon Trust to improve their energy efficiency and reduce their energy costs."

The loans are available to all SMEs in England and Scotland and all businesses in Wales, which have been trading for at least 12 months. Businesses in Northern Ireland are eligible for loans up to £400,000.

The Carbon Trust is funded by the Department for Environment, Food and Rural Affairs, the Department for Business, Enterprise and Regulatory Reform, the Scottish Government, the Welsh Assembly and Invest Northern Ireland. Details: carbontrust.co.uk