However, the number of mortgages approved reached a five-and-a-half-year, high providing further evidence the housing market is heating up.
The Bank of England found banks took lending out of the economy, at the fastest rate since December, in August in a development that may dent hopes the funding situation improved for firms over the summer.
These had been encouraged by news total net lending rose £466m in July. Lending to SMEs was up £235m in June, though banks were repaid £1.3bn net by non-financial firms in June.
Howard Archer, senior economist at IHS Global Insight, described the drop in lending in August as disappointing.
He said the numbers would raise fresh questions about the effectiveness of official efforts to encourage banks to increase lending.
In April the Bank of England extended the Funding for Lending Scheme that makes cheap money available to lenders to January 2015. It "heavily skewed" the incentives to boost net lending towards small and medium sized enterprises.
Mr Archer said: "So far, it has appeared that at best the FLS may have stopped lending to businesses from falling more than it has."
Last week the British Bankers Association said high street giants' lending to SMEs was stable in August.
The Bank of England found the value of loans provided to SMEs, excluding overdrafts, fell to £3bn in August compared with an average of £3.5bn over the previous six months.
SMEs made loan repayments totalling £3.6bn, in line with the average over the previous six months.
The BBA reckoned high street banks cut net lending to non-financial firms by only £600m in total in August, compared with £2.6bn in July.
After the BBA data came out the Federation of Small Businesses in Scotland renewed calls for ministers to try to boost competition in business banking markets.
Several major lenders are still restructuring their balance sheets and reducing their exposure to markets like commercial property.
The figures may reflect subdued demand for credit.
Loan approvals for house purchase hit 62,226 in August, the highest since February 2008, from 60,914 in July.
Gross lending to non-financial businesses totalled £9.6bn in August while they repaid £12.3bn.
Lending and repayments averaged £13.1bn and £14.5bn respectively in the previous six months.