The Social Enterprise Investment Fund, which invests in social enterprises in the heath and social care sector, will reopen with £19m of new funding in the summer.
Investment criteria for the current year have yet to be finalised, but the fund has previously offered grants of between £50,000 and £150,000 and loans of up to £1m.
The Department of Health will contribute about £17.4m of the fund's capital. The remainder will come from repayments and interest on loans from previous years.
A joint statement from the Department of Health and the Cabinet Office, which is also involved in the initiative, said that one of the main functions of the fund will be to support public sector workers who want to spin out their organisation into an independent mutual under the government’s ‘right to provide’ agenda.
Francis Maude, the Cabinet Office minister, said: "There is a real pent-up frustration among front-line public servants who are fed up with constraints imposed by the monolith within which they are imprisoned. Spinning out into a mutual gives them a chance to do things in ways they know are best.
"Now is the time for entrepreneurial public servants to take the initiative and push for ownership."
Seif has invested £82m in 458 social enterprises since 2009.