Small businesses are receiving more support from the banking sector, according to the British Bankers' Association (BBA).

Figures from the group reveal that last year more than 590,000 small companies established new banking relationships.

There was an eight per cent growth in term lending to reach £37.2 billion, while overdrafts fell by two per cent, the study indicates.

Commenting on the data, BBA director of statistics David Dooks said: "In 2006, the liquidity of the three million firms in the small business sector was particularly strong, as their deposits grew and their use of overdraft borrowing reduced marginally.

"At the same time, small firms' structured term borrowing to fund investment showed healthy growth."

The research also states that deposit levels rose by 11 per cent to £46.4 billion during 2006.

BBA members operate a total of 130 personal accounts and contribute £35 billion to the economy.