Praesidian Capital Europe and BMS Finance have become the latest partners of the business bank and will begin lending in early 2014.

As part of the agreement, Praesidian Capital Europe has been allocated £30 million to expand its US model through a new fund to provide senior and mezzanine debt finance for SME businesses in the UK.

Fellow new partner BMS Finance is focused on lending to smaller and medium-sized UK businesses with high growth potential and nearing profitability. The £15 million it is receiving is going towards a fund which, at first close, will be worth £30 million.

Speaking to GrowthBusiness, Cable says that the business bank is trying to do two things: plug a gap which has emerged due to the decline in bank lending to SMEs and cover a long-standing British problem whereby ambitious growth companies find it very difficult to access long-term debt finance.

Commenting on the need to provide a set of finance and growth initiatives tailored to different company sizes, Cable adds, ‘We know there is a problem with business finance in the UK. The real difficulty is with the British Mittelstands [SMEs], which in Germany have ready access to all sorts of funding, but here find it difficult.

‘They are too small for the stock market, but have run out of the family and friends capital which funds start-ups. Those are the kind of businesses which need these facilities.’

The business bank is run by the Department for Business, Innovation and Skills and is not authorised or regulated by the Financial Conduct Authority. Once the government has received European Commission state aid clearance (predicted to be in 2014), the programme will be transferred to a new plc and operate as a government-owned financial institution.

More on the business bank:

• The government’s new business bank for SMEs
• New business bank will not aim to displace existing institutions
• Business bank could be eclipsed by pension funds for finance support

In response to what can be done to fill the gap that the retrenchment in bank lending has created, Cable says that the UK needs more small, innovative and alternative lenders.

‘Peer-to-peer lending is taking off like wildfire. I visited a furniture business in Durham last week which would have gone under had it not been for peer-to-peer lending,’ he adds.

‘We’re hoping that the first £300 million of new funding for the business bank will open up new channels.’

To coincide with the new business bank allocations, Cable and the government also launched the Business is Great Britain campaign. Designed to ‘build confidence amongst small businesses’, the initiative will be using case studies of companies which have been successful in building out operations.