Ross-on-Wye International Festival has been thrown a lifeline after talks with Herefordshire Council.
The council has agreed to make a £30,000 loan and an advance payment of its annual grant as part of the rescue package.
However, it has also demanded a review of the festival operation and a greater say.
Coun Roy Stockton, from Colwall, the council's community and social development spokesman, said: "If we don't offer this lifeline now it's almost certain the festival will fold in a matter of weeks and the many benefits flowing to the county from the event will be lost."
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