The assembly government says it wants to "unlock potential"

It would mean the assembly government borrowing money for the first time after a pledge in Labour-Plaid Cymru's One Wales coalition document.

The Federation of Small Businesses (FSB) in Wales has welcomed the scheme.

But opposition parties said they needed more detail to see how it would work and they feared it could be spread too thinly.

Some of the cash would be borrowed from the European Investment Bank, some would be raised from European funding and some from departmental budgets.

The project aims to provide an investment fund for Welsh businesses in areas where they find it difficult to raise capital.

Huge potential

The money would be invested in companies and then, it is hoped, repaid as companies grow.

"Many SMEs (small and medium enterprises) - particularly in unfashionable areas - find it hard to get capital to grow," said Deputy First Minister Ieuan Wyn Jones.

"I am determined that we unlock the potential of the European funds to benefit communities in our valley and rural areas," he told a conference on the Heads of the Valleys in Hirwaun.

Mr Jones, who is minister for the economy and transport, added: "This programme is focused on urban areas and has huge potential.

"By putting together European funds, private equity and public money and assets such as surplus land, we can create a regneration fund for the Valleys which, once again, will outlive the current round of EU funding."

The FSB in Wales said the move could provide funding for businesses over a longer term.

Small businesses are the backbone of local economies around Wales

"We welcome this type of initiative," said Non Rhys. the federation's policy officer.

"It could prove far more flexible and adaptable than the grant structure. It would also mean that the investment would benefit firms over that crucial first eighteen months."

However, opposition parties said they needed more detail and there are fears the money could be too little for the whole of Wales.

"It looks good on the surface but we need more information about how a scheme like this would operate in practice." said David Melding, shadow economic development minister.

But he added: "It is important the private sector grows. Most jobs growth over the next five to 10 years is likely to be in the small medium enterprise sector."

Positive effects

Kirsty Williams, Liberal Democrat economic development spokesperson, also said more details were needed.

"Small businesses are the backbone of local economies across Wales and I certainly welcome any investment in this area.

"It remains to be known over what period of time this sum will be made available and I fear that by spreading it too thinly over time its positive effects will be minimised," she said.

A recent study showed that small and medium sized businesses face a �155m funding gap between what they need to expand and what they can raise.