Poundland has been given breathing space in its fight to avoid collapse after its owners agreed to release £10 million to keep the discount chain's shops trading while rescue talks continue.

The funding release comes as a deadline to find a buyer for the business was due to run out. Sources close to the talks told the BBC they expect the deadline to be pushed back now that the money has been released, giving negotiators more time to put together a rescue deal.

£50m frozen as shelves run low

The chain's troubles deepened when its owners stopped it from drawing on money held in its own bank accounts. The BBC understands that around £50 million was frozen by Gordon Brothers, the American investment firm that owns Poundland, leaving managers unable to refill shelves across the chain's 600 shops at the start of the busiest shopping season of the year.

The £10 million now being released is modest next to the sums involved, and those close to the situation have described it in those terms. Even so, it may be enough to put off a collapse while a longer-term answer is explored. Sky News reported that the money would be used to pay the retailer's suppliers.

MPs to question owners on Wednesday

A committee of MPs is due to question Gordon Brothers on Wednesday, after accusations that the firm stands to gain from selling off the chain's stores and stock piece by piece rather than keeping the business alive as a whole. The investment firm has denied the claims.

A further date matters this week. A ten-day protection period shielding Poundland from its creditors runs out on Thursday, but it can be extended if there is a realistic prospect of a deal that keeps the company solvent and trading. Gordon Brothers bought the chain for just £1 last year.

Chief executive Barry Williams told staff last week that like-for-like sales were up 11.4 per cent. The chain employs around 11,000 people, and its future remains uncertain until a buyer is secured.