In a keynote speech at the Liberal Democrat party conference in Brighton the business secretary will state how this will help companies who haven't been able to get credit since the financial crisis.
Cable (pictured) will tell party colleagues that the Government should intervene in the failing banking market to secure the long-term future of entrepreneurs. And he also promised a clearer strategy to help the UK out of recession.
He will say: "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.
"I am working with the chancellor to develop a state-backed institution that will combine up to £1 billion of new government capital with a larger private sector contribution.
He will add: "This will then apply further leverage through guarantees to support up to £10bn of finance to SMEs [small and medium enterprises] and mid-sized business - a significant portion of all the lending available."
The details of exactly how the bank will work are still being drawn up and will be announced in December. However, it is expected that the Government will invest up to £1 billion, which will be matched by private investors.
It will then seek to borrow a further £8 billion on the back of this money.
The bank is expected to be operational within 18 months. Run at arm's length from Whitehall, it will not lend directly but supply funding through new small banks.
