to boost lending to small and medium sized businesses, business secretary Vince Cable has unveiled.

The institution will bring together £2.9billion of existing Government capital and £1billion of new capital set aside for alternative lending channels in the hope of encouraging further private sector contributions and guarantees.

In his foreword to a strategy update on the business bank, Vince Cable said: "Inadequate access to finance for small and medium sized enterprises is one of the biggest risks to economic recovery. We need bold action to fix what has always been a weakness of the UK economy, and since the financial crisis has become urgent problem."

The business bank will not directly lend to or invest in businesses. Instead, it will work with the private sector to manage the combined £3.9 billion to increase current channels of finance.

It will bring together the raft of existing business finance schemes, creating a single port of call for businesses to simplify access to finance, the strategy update said.

Business groups have voiced their frustration at the lack of detail and implementation since Vince Cable announced initial details of the bank in September last year.

CBI chief policy director, Katja Hall, said: "This should give confidence to businesses that there is now a long-term solution to plug the finance gap for patient capital in the UK."

"Businesses didn't want a host of new finance initiatives introduced as part of the Business Bank but simplification of existing support. Bringing all government financial support and advice initiatives under one roof will improve access for smaller firms, helping them fulfil their growth potential."

Mr Cable said the bank would begin investing in September and be fully operational by the second half of 2014.