The Department of Transport has announced it will contribute 20 per cent of the purchase price of new e-cargo bikes, up to a threshold of £5,000.
The Government previously announced a £2 million funding package to support the uptake of e-cargo bikes.
Peter Eland, the Bicycle Association's technical manager, said: "This is a welcome and timely announcement, providing substantial support to an increasingly important sector of the cycling industry.
“The Bicycle Association has been lobbying for some time for transport policy to fully embrace the clean, congestion-free and innovative transport possibilities of electric cargo bikes, and this is a very welcome step towards that goal.
“We're looking forward to engaging further with Government as they develop the details of the scheme."
Funding will be conditional on individual businesses following a code of cycle safety good practice.
The Government has said this fund will help to cut congestion and improve air quality, encouraging companies to replace older, polluting vans with a zero emission alternatives to create a cleaner, greener future.
Money will be split between larger fleets and smaller operators to ensure benefits are available to and spread between all sizes of business.
The department has also separately set aside £100,000 for capacity building in the industry, and will be reviewing opportunities and potential measures to encourage commercial leasing of e-cargo bikes in order to support widespread uptake over the longer term.
Roger Geffen, Cycling UK's policy director, said: “The Government’s support for electric cargo bikes is welcome news.
"Switching to cargo bikes could take lot of white vans off our roads and streets, making them safer, cleaner and more efficient for everyone.
“Yet Cycling UK remains mystified about why the Government is wholly unwilling to support electric bikes for personal travel, while continuing to offer generous support for electric cars and scooters.
"Supporting e-bikes could be a much more efficient solution not only for reducing pollutant and greenhouse gas emissions, but for tackling congestion, road danger and physical inactivity too.”
Andy Cope, director of Insight at Sustrans, said: “We welcome the Government beginning to recognise the potential of e-cargo bikes as an effective tool for delivery goods in cities and towns.
“In urban areas where space is limited we need to focus on moving people and goods as efficiently as possible - cargo bikes, including electric models have a key role to play.
“With leadership and urgent action, e-cargo bikes could transform cycling for many businesses, including delivery and maintenance services, and help tackle congestion and poor air quality by making cycling a realistic transportation choice.
“UK businesses including Sainsbury’s, Zedify and DHL are recognising this and the Government has a clear opportunity to incentivise and enable others to follow.
“Alongside support for purchasing e-cargo bikes the UK Government needs to prioritise investment in high quality infrastructure and engagement initiatives to maximise the safety of cycling and ease of use of all types of bikes.
“Everyone who cycles, regardless of the type of a bike, needs to have access to high quality and inclusive infrastructure.”