Colleges have contact with fewer than one in five of the companies who most need their help with training, according to an MPs' report.
The Department for Education and Skills told the House of Commons public accounts committee that the figure showed the need for its new brokerage system.
At a cost of pound;70 million over two years, about 450 brokers will be paid to set up links between colleges, training providers and employers to encourage take-up of the free training on offer in the Government's Train to Gain scheme.
Both colleges and training providers say the system is "nonsense" and a "foolish waste of money".
But in a written response to MPs, published in the report on Monday, the DfES said: "Skills brokerage will also benefit providers.
"Currently, the number of businesses that FE colleges engage with is only about 18 per cent of the number of companies out there that we want to support in training their staff.
"This is potentially a huge market that independent brokers with experience in this area could help providers reach.
"Furthermore, we will be targeting this service at the small, hard-to-reach companies that we know need help with staff training, but don't know where to turn."
The Association of Colleges cast doubt on the figure, claiming the department had not published supporting evidence that college engagement with small businesses was so low.
It maintains that colleges provide services to hundreds of thousands of employers and only scaled back its activity in response to earlier changes in government policy.
If the Government wants colleges to do more for employers, it needs to reduce the restrictions it has imposed on the services they can offer, the AoC said.
David Bell, permanent secretary at the DfES, said the responsiveness of colleges varied between subjects, with information technology courses more likely to meet employers' needs than construction, for example.
An earlier National Audit Office survey found that 90 per cent of businesses that train their staff use private companies, with just 46 per cent using colleges.
The brokers are intended to target the one in three employers that do not currently provide formal training, which the DfES says are mainly small businesses.
Nationally, employers spend pound;10.8 billion on internal training and Pounds 2.6bn in colleges and private training providers. Trainee wages cost a further pound;10.3bn.
Simon Briault, spokesman for the Federation of Small Businesses, said previous efforts to support small business training were usually wasted.
Just 4 per cent of small companies were aware of services such as Business Link, an FSB survey found. "Nobody really knows about these initiatives," Mr Briault said. "People who do take advantage of them find they're quite good. But there does seem to be a communication problem.
"Small businesses operate in a different way. They've got a few staff who are working long hours and doing several jobs. You don't necessarily have time to look around for these opportunities."
Mr Briault also questioned whether many small businesses had significant training needs. "It doesn't take a huge effort for a small shop to tell someone how to run the cash register," he said.