Geely, the Chinese carmaker picked as the preferred bidder for Ford Motor's Volvo unit, is seeking at least $1 billion in loans from Chinese banks to finance its $1.8 billion bid, sources said on Tuesday.

Home-grown 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 <3988.HK> <601988.SS>, China Construction Bank <0939.HK> <601939.SS> and Export-Import Bank of China had agreed to extend loans to Zhejiang Geely Holding Group, said the banking sources briefed on 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 queuing 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.

Last month, Volvo's union leaders held their first talks with Geely but 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 elaborate or comment on the timeframe for the deal, which analysts and industry sources expect to be finalized by early next year.

All the three Chinese banks involved said they would not comment on specific loans to clients.

Last week, Geely reached agreement with Ford on intellectual property rights (IPR) issues in its bid for Volvo, clearing a major barrier for the deal.

The remaining issues for Geely to negotiate with Ford, such as long-term strategy for Volvo's sales and production, would be much easier to solve, said an industry source close to Geely.

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 on Tuesday.

The loans backing Geely's bid for Volvo are expected to have a five-year tenor, said another of the sources.

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

Standard Chartered <2888.HK> and HSBC Holdings Plc <0005.HK> are Geely's principle banks, according to its annual report.

Bohai Industrial Investment Fund, a private equity fund backed by the Chinese government, was also in talks with Zhejiang Geely Holding Group, the parent of Hong Kong-listed Geely Automobile <0175.HK>, to support its bid for Volvo, said the sources.

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, said the sources.

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 yet but media reports had put it closer to $2 billion than the $6.45 billion Ford paid for Volvo in 1999.

Citigroup Inc and JPMorgan are advising Ford, while Rothschild is advising Geely.

(Additional reporting by Quentin Webb in London, Alison Leung in Hong Kong, Fang Yan in Shanghai and Langi Chiang in Beijing; Editing by Lincoln Feast)

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