Nearly a third of the public money lent to would-be entrepreneurs to start their own businesses has become bad debt, according to official figures.
The Government-backed Start Up Loans scheme has seen £72.4 million worth of loans written off or fall into default since the programme was launched in September 2012.
The amount is equivalent to 31% of the £231.8 million loaned out under the programme since inception and is higher than the £69.7 million recouped in loan re-payments.
The Start Up Loans scheme aims to help people launch small companies by offering personal loans of up to £25,000, which must be used for a business. The loans have a fixed interest rate of 6% per annum.
The scheme was championed by serial entrepreneur Lord Young as a way of boosting employment across the UK.
The figures were released by the British Business Bank following a Freedom of Information request by the Press Association.
They cover the period from when the Start Up Loans scheme began to June 30 this year.
The FOI also revealed that 35% - or 13,719 - of the 39,566 loans issued since the scheme began are in default or have been written off by the British Business Bank.
John O'Connell, chief executive of the TaxPayers' Alliance, has questioned whether taxpayers' money should be used to kick-start businesses.
"Too often the success of these schemes is judged by inputs - how much money is shuffled out the door, and how quickly - rather than outputs.
"As a result performance tends to be patchy at best, and again we've seen that here with this stunningly high, and costly, default rate.
"But the wider question is why taxpayers are funding loans to begin with. That's what commercial banks are for and now taxpayers are on the hook for loans that were evidently deemed to be ill-advised by those same banks.
"There are answers to be found on how to increase lending from commercial banks, but the Government stepping in with a taxpayer-funded alternative should not be one of them."
The Government has set the default rate ceiling for Start Up loans at 40% because it is lending money to risky clients and expects some businesses to fail.
The Start Up Loans Company (SULCo) aims to get people who fall into arrears on to a repayment schedule or refer them to debt collection agencies.
SULCo writes off a loan when it is no longer cost-efficient to try to reclaim the money back.
The British Business Bank said it classifies a Start-Up loan as in default when six or more payments are in arrears.
The Government announced on Wednesday last week that the Start Up Loans scheme has now leant £250 million to people looking to start businesses.
A spokesman from the Department for Business, Energy and Industrial Strategy said: "A quarter of a billion pounds has gone to entrepreneurs through the Start Up Loans programme, creating thousands of jobs and generating a return on investment to the economy of £3 for every £1 spent.
"The programme provides loans and mentoring to people from all walks of life who want to start a business but struggle to get finance from their bank."