The National Day Nurseries Association's annual providers survey found that 17 per cent are expecting a loss, compared with nine per cent in last year's survey.
Just 43 per cent expect to make a profit or surplus this year, the survey of 788 providers in England found.
Key factors include a rise in business rates due to revaluation this year. Average rateable values for nurseries are set to increase by 24 per cent to £24,000, with the largest increase as high as 200 per cent, the NDNA says.
A rise in staff wages, by seven per cent on average, caused by an increase in the National Minimum Wage and National Living Wage, is another.
Providers are also expected to make an average loss of £958 on each government-funded place for three- and four-year-olds. Eighty-five per cent of those surveyed said they were underfunded for these places.
Such concerns are leading many to shun the government's doubling of the free entitlement for three- and four-year-olds to 30 hours, which is to be rolled out in September.
One in five say they will not offer this extended entitlement, while 44 per cent said they will participate and 35 per cent said they do not know.
NDNA chief executive Purnima Tanuku, said: "Because the 30 'free' hours policy is underfunded, many nurseries told us they will turn their backs on this expansion. Our survey shows this could lead to at least 50,000 children missing out on £250m worth of childcare."
The survey also found that providers are looking to offset rising costs and underfunding by increasing fees and charges for families.
Of those surveyed, 83 per cent plan to increase their fees this year, by an average of 4.5 per cent. In 2016, 71 per cent said they would raise fees by an average of four per cent.
Already 71 per cent are charging for meals and snacks, the survey also found.
"There is no such thing as 'free' childcare - parents, nurseries and their staff are all paying for this.
"It is time the government stopped promising parents 'free' childcare hours unless they are prepared to invest the money needed. This manifesto promise is in real danger of failure," Tanuku added.