The Royal Bank of Scotland (RBS) and Natwest have signed up to lend an extra £1bn to small businesses under the government's Working Capital Scheme.

The agreement with RBS and NatWest is the first deal for the Working Capital Scheme, which was launched in January.

Under the scheme the government will provide banks with guarantees covering 50% of the risk on bank lending for the day-to-day capital requirements of companies with turnover of up to £500m.

"RBS and NatWest have agreed that the capital released by their participation in the Scheme will be redeployed in support of lending to credit-worthy SMEs and mid-corporates," said business minister Ian Pearson.