The Indian car maker has recruited American bank CitiGroup to advise it, report The Sunday Times.
Tata is seeking a short-term bridging loan from the government. This will help it with cashflow problems caused by a collapse in new car sales.
Insiders at the company say the government is ‘close’ to approving a £500 million bridging loan. However, government insiders disagree, saying the company does not urgently need cash.
Experts say a solution will not be found quickly – despite Tata’s recruitment of Citigroup.
However, the chief of Tata says the government should provide support, like other European governments have done.
The German government has pledged a loan of £1.6 billion to Opel (Vauxhall in the UK), and is considering a similar loan to Ford. The Swedish government is considering aid to Saab and Volvo, too.
In separate news, business secretary Lord Mandleson could commit to an extension of the pre-budget report’s special liquidity scheme this week. He will address a motor industry summit in Brussels on Friday, where an announcement is expected.
It will give car makers access to finance, helping them fund loans for new car buyers.
A further announcement could come on Wednesday. The Sunday Times reports that Mandleson will give evidence to the Commons business committee, on the state of the car industry.