The loans are open to local authorities, housing associations, small to medium sized businesses and energy service companies.
Under the first year of the initiative, ten projects were granted funding worth £2.1million, while an additional £400,000 has been allocated subject to further information.
The announcement of the funding for the second year of the district heating fund comes as the Energy Saving Trust released figures showing Scotland is on course to meet its target of 11 per cent of heat to come from renewable sources by 2020.
In 2011, 3.8 per cent of heat in Scotland was produced by renewable, beating the interim target of 3.5 per cent.