Defunct online music-swapping service Napster is in talks with prospective buyers on a loan to keep it going until it is sold.

Napster has not yet agreed terms with the favourite would-be purchaser, whose identity has not been made public.

The firm - which is in Chapter 11 bankruptcy - is still in talks with other bidders, which are also offering loans.

The firm's administrators hope to initial a deal on a loan next week, and in the meantime are considering the sale of some of its assets in order to generate rapid cash.

Meetings over the company's financial position are to continue on Friday.

Sale awaited

The sale of Napster, if it happens, would close a lengthy and complex chapter in the history of the internet.

Previous deals have, however, come off the rails in the past.

On 3 September, the US bankruptcy court barred the sale of Napster to Bertelsmann, a German media giant, after worries over whether the deal had been done in good faith.

Since then, a number of other closed bids have been put forward, with the reserve price of $6m.

Napster at its peak attracted millions of users who exchanged music files across the internet.

But the firm provoked the wrath of record companies who felt the service was effectively allowing users to download and use music files without copyright and crucially without paying.

After lengthy legal action the service was shut down and despite promises that it would one-day relaunch it has struggled financially.

A whole host of similar services to Napster have sprung up, many of which face legal action, while official services, such as Pressplay, have also launched.