Senior Policy Adviser at the Forum of Private Business, Alex Jackman, said of the deal:
"If this deal goes ahead it will see Co-op land a 10% slice of the UK's high street banking pie. That's a sizeable figure and will give them real clout as a mainstream lender.
"This could be a really significant development for small firms looking to restore traditional relationship banking, where the tick box lending criteria approach will hopefully have no place.
"Co-op is already a respected high street name with great ethical standards and credentials most other banks can only dream of.
"If this deal goes through it could genuinely be a fresh new era for high street lending for SMEs – something we have long been calling for.
He added: "Co-op are big on fair trade, so let's hope that shines through in their retail banking arm when it comes to small business lending."