The remaining issues for Geely to negotiate with Ford, such as long-term strategy for Volvo's sales and production, now will be much easier to resolve, said an industry source close to Geely. Ford is the parent company of Volvo.

Representatives from Ford and Geely, the parent of Hong Kong-listed carmaker Geely Automotive, have been discussing a sale, for about $2 billion, since early this year.

The talks, being held in London, are focused on the US carmaker's concerns about sharing its proprietary technology and plans for new products.

After resolving the IPR issue, Geely now is seeking at least $1 billion in loans from Chinese banks to finance its $1.8 billion bid, sources said.

Homegrown Geely, which means "lucky" in Chinese, is hungry for modern and innovative technologies from the Swedish brand to upgrade its car lineup and tap the auto market in China, the world's biggest.

At least three major Chinese banks -- including Bank of China, China Construction Bank and Export-Import Bank of China -- had agreed to extend loans to Geely Holding Group, said the banking sources briefed about the plan.

"Money is not a problem for Geely," said a source. "They definitely have strong support from Chinese banks, and there are a number of private equity funds lining up to invest in Geely."

The sources asked not to be identified, as they were not authorized to speak to the media.

Export-Import Bank of China is a policy lender wholly owned by the Chinese government and directly led by the cabinet. Bank of China is China's top foreign exchange lender. China Construction Bank is the country's No 1 property lender.

Volvo's union leaders held their first talks with Geely last month, but they were still waiting to see Geely's financing plans for the loss-making Swedish carmaker.

A Geely spokesman in Beijing declined to comment on the loan plans but said Geely is still in negotiations with Ford to finalize details of the takeover.

He declined to comment on the timeframe for the deal, which analysts and industry sources expect to be finalized by early next year.

Representatives of the three Chinese banks said they would not comment on specific loans to clients.

Geely also needs to build relations with Volvo's management, union leaders and the Swedish government, which are part of the negotiations.

All China funds?

Global carmakers such as Volkswagen and General Motors are stepping up their presence in China, where Geely sells models such as the Free Cruiser and Geely Kingkong.

Helped by government subsidies, the Chinese car market overtook the United States as the world's largest earlier this year. China has plenty of room to promote cars sales further in 2010, a senior Chinese government official said.

The loans backing Geely's bid for Volvo are expected to have a five-year term, said another source.

Currently, no foreign banks are involved, but sources said it is possible Geely might tap one or two foreign banks for some lending contributions in an effort to downplay Western concerns that financing is largely dependent on Beijing.

Standard Chartered and HSBC Holdings Plc are Geely's principal banks, according to its annual report.

Bohai Industrial Investment Fund, a private equity fund backed by the Chinese government, was also in talks with Geely Holding Group to support its bid for Volvo, the sources said.

However, no agreement between Bohai and Geely had been reached, and Bohai's investment would only be a small part of Geely's acquisition of Volvo, the sources said.

There were also some other China-focused private equity funds in talks with Geely about financing, said one source, declining to elaborate.

In September, Goldman Sachs invested $334 million in Geely Automobile, although Geely said Goldman's money would mainly support its domestic car plant expansion.

Ford and Geely have not disclosed a possible sale price for the Volvo deal, but media reports put it closer to $2 billion than the $6.45 billion Ford paid for Volvo in 1999.