Image source: Volkswagen.

Volkswagen (OTC:VWAGY) has agreed to the terms of a 20 billion euros ($21 billion) loan to help fortify its balance sheet against the mounting costs of its emissions-cheating scandal, Reuters is reporting

What's happening: VW has yet to make an official announcement. But according to reports from Reuters and The Wall Street Journal, VW has been working with a group of about 13 major banks to secure a "bridge loan" with a 12-month term. The reports say that the loan is expected to cost VW about 150 million euros ($158.4 million) in interest payments and fees.

Bloomberg reported on Wednesday that VW is expected to sign the deal on Friday. It also reported, citing "people familiar with the matter," that the loan was "oversubscribed" and that VW could have raised as much as 29 billion euros. 

Why VW needs this loan: VW's ability to meet the costs arising from its emissions scandal while still maintaining a completive program of investment in future products has come into question. The company could be on the hook for tens of billions of euros in fines, lawsuit settlements, and recall costs, all a result of its decision to sell millions of diesel-powered vehicles equipped with software that cheats government emissions tests.

These questions have cut the value of VW's shares by roughly a quarter since the U.S. Environmental Protection Agency announced the first charges against the company on Sept. 16. Its bonds have also been hammered, and its creditworthiness is being questioned. Standard & Poor's has downgraded VW's credit rating twice since the charges were first announced, most recently cutting the company's rating from A- to BBB+ on Tuesday. 

Volkswagen's U.S. sales were clobbered in November, falling almost 25%, and its dealers are pressing hard for support and answers. Its sales at home are also suffering: The overall new-car market in Germany was up 8.9% in November, but VW-brand sales fell 2%, according to German government figures released on Wednesday.

What's next: If VW does in fact sign the deal on Friday, it's likely to make an official announcement then. The financing should give investors some confidence. But it's hard to be too confident when we still don't have a clear idea of the extent of VW's likely exposure -- and when we know it could run well into the tens of billions of euros.

Litigation and criminal investigations are just getting underway, and it may be months or years before we know the ultimate costs to VW. But we should have a somewhat better idea of the near-term costs in a few weeks. VW has submitted a plan for recalling and repairing the 567,000 affected diesel-powered vehicles in the U.S. 

Regulators have until Dec. 21 to review the plan, and it's likely that they'll make some sort of announcement on that date. That could give us an idea of how bad things are going to get for Volkswagen.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.