Wilbur Ross was part of the Virgin-led consortium to refinance and recapitalise Northern Rock in 2007 and 2008 before the bank was nationalised.
Virgin says that the £100m investment from Wilbur Ross will speed up its expansion to offer full retail bank services, as well as the creation of a branch network.
As part of the deal James Lockhart, vice chairman of Ross’ company WL Ross, will also join the Virgin Money board.
The deal and board appointments remain subject to approval from the Financial Services Authority.
Sir Richard Branson, founder of the Virgin Group, says: “I am delighted that WL Ross has decided to invest and partner in our vision for a new way of banking.
“Our ambition is to make everyone better off through good value and transparent products backed by a great customer experience.”
Wilbur Ross Jr., chairman of WL Ross, says: “We are impressed with Virgin Money’s well deserved reputation with UK customers and with its growth strategy.
“We look forward to supplying substantial additional capital to support Virgin’s acquisition program.”
The investment follows Virgin Money’s acquisition of Church House Trust in January, providing the the platform and banking license needed for Virgin Money to develop a UK retail banking business.
Virgin Money is reported to be one of the bidders in the running to acquire 318 Royal Bank of Scotland branches, as part of the forced disposal called for the European Union’s Competition Commission.