The two parties are expected to issue a statement later on Wednesday to report on the progress of the talks.
There could be something in as soon as the next few hours, said the source, who asked not to be named due to the sensitivity of the situation.
Both sides expect a sale of the Swedish auto brand to close early in the new year, sources told Reuters on Tuesday. The estimated $1.8 billion deal would be the largest overseas acquisition by a Chinese automaker.
Shares of Zhejiang Geely's Hong Kong-listed Geely Automobile <0175.HK> rose 7.6 percent, beating a 1.1 percent gain on the broader Hang Seng index <.HSI> on Wednesday, on optimism that the Volvo acquisition would be wrapped up soon.
An acquisition would have no immediate profit impact on the listed Geely, but investors hope the company could eventually leverage Volvo's technology to upgrade its cars.
Zhejiang Geely, named by Ford as preferred bidder for Volvo, said in November it had reached an agreement with Ford on intellectual property (IP) rights involving Volvo, addressing what had been a key stumbling block in the acquisition process.
But the sources said one of the outstanding issues in recent discussions has been how to treat the intellectual property that Ford would transfer in a Volvo sale.
A Ford spokesman declined to comment on the possible statement or give a timeline for the negotiations. We have nothing further to add at present save that Geely is our preferred bidder and we are working toward an agreement with Geely that is in the best interests of all parties, John Gardiner wrote in an email.
At least three major Chinese banks have agreed to extend loans to Zhejiang Geely, including Bank of China Ltd <601988.SS>, China Construction Bank Corp <0939.HK> <601939.SS> and Export-Import Bank of China, sources have said.
(Reporting by Alison Leung, Editing by Doug Young and Ian Geoghegan)