Charles Middleton, chief executive of social lender Triodos Bank, said large amounts of government cash could undermine independent charity lenders.
"These funds need to complement the social lending market, not directly compete with it," he said. "I don't want the sector to be dependent on subsidies from quasi-government organisations."
John Kingston, head of Venturesome, the social lending arm of the Charities Aid Foundation, said he had similar concerns.
"To have a robust market, we need to have a variety of players, funding projects with varying degrees of risk," he said. "I don't think it's a good idea for the Government to be the dominant figure in the market. I would like to see a social lending high street, not a single department store."
Jonathan Lewis, chief executive of Futurebuilders, which is awarding £215m of government money to help charities develop bids for public services, said it was a misconception that his fund might damage the social lending sector.
"The sector is currently under-capitalised," he said. "There is much more demand than there is cash. We're not preventing anyone doing anything. In fact, it's part of our mission that we will lend only to organisations no one else will lend to.
"We're forming partnerships with commercial banks and using that to bring more lenders into the sector.
"There are charities crying out for this money. How can lending it to them be a bad thing, whoever does it?"