The lenders will inject a combined 200 billion yen ($1.7 billion) in a debt-for-equity swap, while Sharp will cut 5,000 jobs, scale back its North American television operations and is also likely to agree to spinning off its LCD unit, the source said.
Relief that Sharp was extracting a bailout from its lenders, sent its stock 4 percent higher in morning trade.
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The parties are unlikely to make any announcement on Thursday after CEO Kozo Takahashi meets with bankers to finalize a deal, the source said, declining to be identified as he was not authorized to speak on the matter.
Sharp spokeswoman Miyuki Nakayama said the company was considering various options, but nothing had been decided. More will be revealed in May, when it releases a new business plan, she said.
Representatives for Bank of Tokyo-Mitsubishi UFJ and Mizuho declined to comment. Mizuho is a unit of Mizuho Financial Group and Bank of Tokyo-Mitsubishi UFJ is part of Mitsubishi UFJ Financial Group.
The source said the LCD operations, while likely to be spun off to improve transparency and accountability, would continue to be owned by Sharp for now. Analysts have speculated that a spin off could help pave the way to an eventual deal, such as a merger with rival Japan Display.
Sources have previously said that Sharp and the banks had hoped to agree on a restructuring plan in March, but the company resisted drastic measures and staff cuts that its lenders sought.