Up to £10 billion of new and additional business lending to help small and medium sized businesse was announced by Business Secretary Vince Cable this week.

The government backed Business Bank aims to increase lending to SME’s using private sector funding and will be professionally run and commercially focused.

It will facilitate the provision of loans, including long-term capital, to UK firms through banks and other financial institutions. The new institution will not replace any high street lenders and will operate through the wholesale markets.

“Having a functioning, diverse supply of finance is an integral part of the government’s industrial strategy. It is all about making the right decisions now to secure our long-term industrial success,” said Cable.

“For decades British industry has lacked the sort of diverse, long-term finance that is quite normal elsewhere. We need a British business bank with a clean balance sheet and a mandate to expand lending rapidly and we are now going to get it.

“Alongside the private sector, the bank will get the market lending to manufacturers, exporters and growth companies that so desperately need support. It will be a lasting monument to our determination to reshape finance so it can finally serve industry the way it should. Its success will not be the scale of its own direct interventions but how far it shakes up the market in business finance and helps to ease constraints for high-growth firms.”

Esther Harries, Association of Plumbing & Heating Contractors (APHC) commercial manager, said the association is pleased the government is taking additional steps to help small to medium businesses.

“This new business bank, combined with the recently revised Apprentice Grants for Employers (AGE), means that many small businesses in our sector can now get the help they need to increase their workforce, diversify into a new area or just grow their business,” she said.

“However, on a cautious note – the government need to ensure this banking service is open to all across the sector and any restrictions placed on who can apply for loans is justified once this initiative is up and running.”

More detail on the design of the bank and the types of interventions it will support will be provided in the autumn.