This paper describes the development of a second generation superconducting torsion balance to be used for a precision measurement of the Casimir force and a short range test of the inverse square law of gravity at 4.2 K. The instrument utilizes niobium (Nb) as the superconducting element and employs passive damping of the parasitic modes of oscillation. Any contact potential difference between the torsion balance and its surroundings is nulled to within approximately 50 mV by applying known DC biases and fitting the resulting parabolic relationship between the measured torque and the applied voltage. A digital proportional-integral-derivative servo system has been developed and characterized in order to control the azimuthal position of the instrument. The angular acceleration and displacement noise are currently limited by the capacitive sensor at the level 3x10(-8) rad s(-2)/ squarerootHz and 30 nm/ squarerootHz at 100 mHz. The possibility of lossy dielectric coatings on the surface of the torsion balance test masses is also investigated. Our measurements show that the loss angles delta are (1.5+/-2.3)x10(-4) and (2.0+/-2.2)x10(-4) at frequencies of 5 and 10 mHz, respectively. These values of loss are not significant sources of error for measurements of the Casimir force using this experimental setup.