The scheme could potentially start over 30 thousand new businesses, in a move to boost enterprise and economic growth.
Any young people aged 18-24 accessing the StartUp Loans will receive expert and personal support to help develop a business plan and access training. Where the business plan is robust and approved, they will be able to access a loan, typically in the order of £2,500, with a repayment period of up to five years.
The StartUp loans will be administered by a range of organisations that have experience in working with young people, including the Prince's Trust and Manchester-based Economic Solutions Group.
James Caan, one of the UK's best known entrepreneurs, has agreed to chair a new body to oversee the allocation of funds and to work with delivery partners to ensure the young people gain the maximum benefit from the support and finance on offer.
The announcement comes on the day that Lord Young's report on enterprise is published. The report sets out the UK's enterprise landscape and offers guidance on starting a new business.