The state-owned British Business Bank (BBB) has swung to an annual pre-tax loss of more than £147m.
The economic development lender says wider economic problems led to a drop in the valuation of businesses it has invested in.
The bank says it made £1.6bn of funding agreements in the year "despite the challenging economic environment".
BBB was set up in 2014 to lend money to and buy stakes in smaller UK businesses to help them start up and expand.
The bank said the value of its investments fell by £146m, or 5%, in the 12 months to the end of March. That compares to a gain of £619m in the previous year.
Around the world the valuations of technology firms have fallen in recent months as investors became increasingly wary due to rising borrowing costs and weak economic growth.
"Given the longer-term 10-year horizon for most of our investments we would expect an overall upward trajectory despite these in-year fluctuations," the bank's chief executive Louis Taylor said.
Its total funding now stands at £12.4bn to more than 90,000 businesses, beating its £10.7bn target, BBB said.
The figure does not include the Coronavirus loans which it administered.
The BBB is responsible for administering the government's three Covid-19 loan schemes and its Future Fund, together responsible for delivering more than £80bn in finance to almost 1.7 million businesses. The schemes are now closed to new applications.
The Future Fund attracted attention after investing taxpayer money in companies such as Bolton Wanderers Football Club and sex party organiser Killing Kittens.
The bank's Start Up Loans programme recently reached a milestone of £1bn in lending, with more than half that going to small businesses run by women and ethnic minorities.
The scheme aims to help underrepresented groups who find themselves excluded from mainstream lenders to help them start businesses, and regions outside of London and south-east England.
Most the funding comes from lenders outside the UK's so-called big five banks.
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