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Two high street banks have unveiled new measures to help small businesses survive the looming recession.

Bank of Scotland is using £250 million of European Investment Bank funding to lend to SMEs, while Lloyds TSB has pledged to agree to "any reasonable request" for short-term finance.

Between them the two banks – which are due to merge as a part of the deal between Lloyds TSB and HBOS - have almost 800,000 small business customers, many of whom have been hit hardest by the difficult economic conditions as consumer spending contracts.

Both banks have said they will guarantee the pricing on overdraft for 12 months from the date or arrangement, while reductions in base rates will be passed on in full.

Lloyds TSB and Bank of Scotland now join the Royal Bank of Scotland – all three of which are receiving government help as a part of its recapitalisation plans – to pledge support to business customers.

Adrian Grace, managing director of Bank of Scotland Commercial, said the bank had been supporting and funding small businesses for 300 years.

"We understand the financial pressures that they are facing during these difficult economic times," Mr Grace explained.

"That is precisely why we have launched this package of measures - to provide both financial assistance and, equally importantly, some reassurance that the bank is committed to supporting small business throughout the UK. We are confident that these measures will make a real difference to our small business customers."

John Maltby, managing director of Lloyds TSB Commercial, added that the measures unveiled would inject "much-needed" confidence to the sector.

"Lloyds TSB is one of the few banks that has been able to continue lending to small businesses through these more difficult times and our lending to SMEs has grown 18 per cent over the past year," he continued.

"As the economic environment becomes even more challenging, we're committed to continuing to support our customers by doing everything possible to ease the pressure small firms are now under.

"The measures in our new charter announced today take our existing approach a step further and mean that businesses that bank with Lloyds TSB have the best possible support for the challenges to come."

Today in the Queen's Speech, the government is set to announce plans for greater scrutiny of banks and their lending to businesses.