Lloyds bank says it will lend an extra £1 billion to small and medium businesses in 2014, due to what it sees as growing strength in the sector.

It also intends to double the amount branch managers can lend without approval to £1 million and to bump lending via invoice finance to overseas businesses by 25 per cent.

"We are now seeing the recovery gathering pace and there are more reasons for SMEs to be optimistic and to start investing for growth," said Lloyds's managing director of SME and mid-market banking, Tim Hinton.

Lloyds is one of the banks at the centre of a government inquiry into lending practices; specifically whether financial institutions are lending enough money to promising UK firms.

But its reputation for saying yes to good prospects has increased against a backdrop of negativity among other major players since the credit crunch hit in 2007.

Other banks have been accused of deliberately putting viable small businesses into distress programmes in order to close them down and seize assets.