Barclays Bank has promised to continue financing Coffee Republic at least until its year-end in March, as the Benjys sandwich chain delivers an £8m final offer for the espresso bar operator.

The bank could have demanded immediate repayment of a £3m loan after the company broke its banking covenants this summer, but it has now agreed in principle to extend the facility for another two years.

Yesterday Coffee Republic reported 20% year-on-year growth for its first half sales and said that like-for-like sales had improved since the summer.

The company also said that it was continuing to close poorly performing outlets to save cash, with four closed over the past two months, lowering its estate to 104 outlets. Plans to sell around 14 more outlets are "proceeding according to plan".

Speaking at the company's AGM, Bobby Hashemi, Coffee Republic's executive chairman, said: "We announced at the year-end that we were conducting a strategic review aimed at identifying ways to enhance shareholder value. This review actively continues as a high priority."

Hashemi said the double-digit decline in like-for-like sales had improved since the summer, and City analysts estimate the fall is now closer to 5%.

Benjys, with 47 outlets in and around London, wants to merge with Coffee Republic to turn itself into a national operator. It is believed to have offered Hashemi a deal that would give it around 60% of an enlarged group. One fly in the ointment is Caffe Nero, which curently owns 10.6% of Coffee Republic, and may try to scupper a deal.