The billionaire former minister Lord Sainsbury has made a £2m donation to Labour as the party prepares to announce a shake-up of its finances.

Labour bosses will unveil a long-term financing deal with its creditors this week, drawing a line under the “loans for peerages” affair, which threatened to bankrupt the party.

The announcement is likely to spark further speculation that Gordon Brown is clearing the way for a snap election next year, although officials said there was “no provision or planning” for an early ballot.

Under the terms of the finance deal, Sainsbury, who was science minister from 1998 to 2006, has converted a previous £2m loan into a donation. Sir Gulam Noon, the Indian food tycoon, who was one of the four Labour lenders nominated for a peerage, will write off his £250,000 loan. According to Labour sources, a third, unidentified creditor has agreed to convert part of his loan into a gift.

The refinancing deal means the party will have to find £2m a year to service its debt. The details are expected to be confirmed this week in an announcement by the Electoral Commission.

Under the restructuring plan, masterminded by Ray Collins, the party’s new general secretary, the annual £2m debt bill will be paid for by “commercial activities” – mainly event sponsorship and conferences – while membership subscriptions and trade union affiliation fees will help pay for the party’s running costs.

Over the past year donations from individuals dried up because of a concern the money would be used to service the party’s £19m debt.

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