While the banks exceeded the £190bn target for total lending to all businesses over the 12 month period, hitting £214.9bn, they collectively missed the target £76bn in lending to SMEs by £1.1bn.
Lloyds, RBS, Santander, Barclays and HSBC, which are all committed to chancellor George Osborne's Project Merlin agreement, fell short of the promised amount after state-owned RBS failed to meet its share of the loan target.
The failure of one of the UK's most prominent high-street banks to reach its target is considered particularly damaging to many SMEs.
John Walker, national chairman of the Federation of Small Businesses (FSB), said the targets were the wrong instrument to encourage lending and growth.
He added: "Even though overall lending is above target, this shows that money is going to bigger businesses and not new and fledgling firms that need it to take advantage of growth opportunities that are there even in these challenging times."
According to new FSB research, the number of small businesses that have used a bank overdraft or loan has fallen in the past two years.
The body surveyed more than 11,000 of its members and found that 35% had used an overdraft in 2011, while only 11% had used a secured bank loan and a mere 7% with an unsecured loan.
"Our research in the last two years shows that around a third of businesses are refused credit and this could be reflected in the fact that newer businesses are using more of their own money to fund their business rather than turn to the banks for help," Walker added.
