The embattled company, with debt of 1.25 trillion yen ($16 billion), is considering selling assets and cutting jobs as it scrambles for money to refinance as much as 360 billion yen of short-term commercial paper and a 200 billion-yen convertible bonds maturing in September next year.

Mizuho, part of the Mizuho Financial Group, and Mitsubishi UFJ are set to lend about 130 billion yen at the end of August and another 100 billion yen next month and will seek collateral this time, unlike previous loans, media said.

The loans would come on top of the 60 billion yen in stopgap financing they provided to Sharp in July to help the company meet its debt requirements, various media outlets reported.

Shares in Sharp, which has shed more than a third of its value since the beginning of August, climbed 3.3 percent by the midday break, compared with a flat benchmark Nikkei average.

"Sharp is asking two major banks to consider an appropriate amount of loans," said company spokeswoman Miyuki Nakayama, but she declined to identify the banks involved as well as the amounts being considered.

Mitsubishi UFJ and Mizuho, which are both major shareholders of Sharp, have far more to lose by letting the company go bust than propping it up with additional loans.

With limited exposure to Europe's debt crisis, Japanese banks have weathered the global economic uncertainty far better than their peers in Europe and the United States.

Sharp, for its part, said it is doing its best to minimize its debt.

The company's spokeswoman said Sharp is looking into various measures such as disposing cross-holdings and accounts receivable, but did not give any more specifics on the considerations.

Sharp holds shares in several companies, including Pioneer Corp and Sekisui House Ltd.

Sharp, which supplies the screens used in Apple Inc's blockbuster iPhones, is grappling with its first layoffs in six decades.

The company is considering cutting a further 3,000 jobs on top of the 5,000 it has already announced, a source familiar with the discussion told Reuters, by selling two TV assembly plants to Taiwanese partner Hon Hai Precision Industry.

Sources at the company's lenders have said Sharp will submit an asset appraisal report to its banks next month that will identify businesses it has to sell in return for funding.

The loan amount would also depend on how much investment Sharp secures from Hon Hai, the world's leading contract electronics manufacturer, which previously agreed to buy about a 10 percent stake at 550 yen per share.

As Sharp's condition has weakened -- shares have fallen some 72 percent this year to 186 yen -- Hon Hai has moved to renegotiate the March deal under which it would have invested $844 million.

The Japanese company's revised restructuring plan is not likely to be finalized until September, bankers involved in the process have said. ($1 = 79.2500 Japanese yen)

(Reporting by Chang-Ran Kim and James Topham. Writing by Mari Saito; Editing by Ken Wills)

• A Permanent Economic Emergency