The surge comes a month after a $2.3 billion government-backed financing package was introduced to help cash-strapped smaller firms keep their heads above water in the credit squeeze.

Its early success was disclosed in Parliament by Minister for Trade and Industry Lim Hng Kiang yesterday.

The Government will now focus on increasing the awareness of these schemes, he said, while ruling out the possibility of it acting as a direct lender to businesses.

The value of approved loans rose from $62 million in December 2007 to $80 million last month, after a string of new schemes to make it easier for companies to secure bank loans was introduced.

Mr Lim said about 500 loan applications were submitted last month, with many still being processed by the banks.

But nonetheless, loans may decline in the next few months, as they did during the Asian financial crisis, he said, as businesses cut back investments and expansion plans amid the slowdown.

The Government's move to enhance the existing loan schemes was pre-emptive, he said.

The schemes, announced in November and which took effect on Dec 1, include raising the Government's share of the risk on loans from 50 to 80 per cent, raising loan amount limits, a Bridging Loan Programme to support working capital needs, and reducing interest rates on some loans by 1.25 percentage points.

But feedback from industry bodies and SME bosses reported in The Straits Times has suggested that loans have still been hard to come by.

'These enhancements have been in place for less than two months. It is too early to assess their effectiveness but preliminary indications are promising,' Mr Lim said.

The onus is still on the companies to provide the relevant data for their applications and 'to show that their businesses are viable and bankable', he added.

'It is only natural, in any recession, that companies seeking loans are questioned in more detail and their applications are scrutinised.'

In response to a question from Mr Zaqy Mohamad (Hong Kah GRC), Mr Lim made it clear the Government would not step in as a lender.

'The Government is...not in a good position to lend to enterprises directly. We do not have the expertise and are not well placed to do so. Credit risk assessment is best done by the professionals in our financial institutions.'

Government loans, he said, are not intended to replace commercial lending. 'Our primary objective remains to assist viable but riskier companies access credit which they would otherwise be unable to get at reasonable rates,' he said.