A government-backed foundation providing loans for student entrepreneurs has extended the payback period from two to three years.

This move to reduce financial pressure on fledgling enterprises comes after the city government listed encouraging technical innovation as its top task for 2015.

From today, graduating students and postgraduates and graduates who left local colleges less than five years ago can be granted up to 200,000 yuan (US$31,922) in interest-free loans by the Eaglet Program of the Shanghai Technology Entrepreneurship Foundation for Graduates (EFG).

They then pay back 5,555 yuan each month for three years.

The loan is only available to Chinese students and former students.

Previously, recipients of the maximum loans had to pay back 4,348 yuan a month for 23 months and then 100,000 yuan in the 24th month.

Some felt this final payment placed a heavy burden on startups often struggling to find their feet.

Last year, the EFG said it allocated 51 million yuan to 239 projects.