Earlier estimates had set loss rates as high as £40 billion.
An estimate from the Department for Business Energy & Industrial Strategy (BEIS) found that around £19.8 million out of the £66.5 billion that was lent under three schemes could be lost.
The data only runs until March this year, and over £10 billion more was lent before they closed, so the final lost figure is likely to be a little higher.
It is a large amount of money, but far behind an earlier estimate that put the losses at between 35% and 60% – or around £23 billion to £40 billion on the loans that had been made in March.
Some of the losses will be due to fraud and payments made in error. Concerns had been high over the Bounce Back Loan Scheme (BBLS), which funnelled £46 billion to small companies by March.
To speed up payments from the scheme, lenders had to do nothing but the most basic checks before handing out money to companies. In the end more, than one million businesses took a bounce back loan.
The loose checks left many worried that fraudsters could be targeting the scheme in large numbers.
The Government estimates that between £3.6 billion and £6.3 billion of the loans might be lost to fraud and error.
“Most of these expected losses arise from borrowers defaulting on loan repayments for legitimate reasons, but the department has also factored in anticipated losses due to fraud in BBLS,” the department said.
“It considers that owing to the scheme design and the speed with which loans were issued through this scheme, the risk of fraud is considerably higher than in the other two loan schemes.”
It has worked with the Insolvency Service Companies house, other departments, banks and local authorities to track down scammers.
This work is expected to continue for several years. Authorities have already made more than 65 arrests and recovered £3.5 million as a result.
Around 4% of bounce back loans have been paid back in full, meanwhile 2% have defaulted, according to the British Business Bank which administered the scheme.
Over one fifth of businesses have chosen an option that lets them pay back their loans at a slower rate.
Only around half a per cent of the loans on two other schemes, called CBILS and CLBILS, have defaulted.
The British Business Bank said: “While it is too early to give a definitive view of the final level of defaults, this latest data suggests that the current levels of failure to repay are lower than some illustrative worst-case scenarios presented prior to repayments commencing.
“These levels are, however, subject to any changes in market conditions or individual circumstances, and would therefore be expected to fluctuate in the future.”