A business lender founded by a prominent former Conservative Party donor is in talks to buy the British operations of Silicon Valley Bank, the US lender which collapsed last week.

Sky News can exclusively reveal that Oaknorth Bank, which was valued at nearly $3bn in a funding round in 2021, is in detailed talks with banking regulators and the government about an offer to buy Silicon Valley Bank UK.

City sources said that a formal offer would be subject to due diligence potentially lasting for several days, but that Oaknorth hoped to secure regulatory approval for its offer as early as Sunday evening.

One banker said that Oaknorth Bank was competing against rival interest from The Bank of London - revealed by Sky News on Saturday - and ADQ, an Abu Dhabi state-backed investment vehicle.

Oaknorth's interest is said to be likely to gain support from regulators, given its eight-year track record since it was launched by co-founders Rishi Khosla and Joel Perlman.

Mr Khosla has donated hundreds of thousands of pounds to the Tories and in 2020 hired Lord Hammond, the former chancellor, as an adviser.

Oaknorth is a British 'neobank' - or digital lender - which describes itself as a vital contributor to the UK's technology and innovation ecosystem by using data and analytics to provide banking services to SMEs.

It has a £4.7bn loan book and has lent over £10bn during its existence.

One insider said it was now working to find a solution to support SVB UK's clients and the wider tech sector, which has been rocked to its foundations by the bank's collapse.

Oaknorth declined to comment.

The Bank of London's interest in SVB UK is also thought to be at a detailed stage, with the government and regulators racing to find a solution to the crisis before markets open on Monday morning.

Formal proposals from The Bank of London to acquire SVB UK have now been submitted to the Treasury, Bank of England and the lender's board, which is chaired by Darren Pope, a former Virgin Money executive.

ADQ's interest is also said to be serious, while major UK high street lenders had also been encouraged to explore offers for SVB despite scepticism that they would do so.

Rothschild, the investment bank, has been asked to handle the quickfire process by SVB UK with the permission of the Bank of England.

The Treasury said in a statement on Sunday that the government was working on funding solutions to help hundreds of SVB UK clients meet cashflow obligations.

"The UK has a world-leading tech sector, with a dynamic start-up and scale-up ecosystem," it said.

"The government recognises that, given the importance of Silicon Valley Bank to its customers, its failure could have a significant impact on the liquidity of the tech ecosystem.

"The government is treating this issue as a high priority, with discussions between the Governor of the Bank of England, the Prime Minister and the Chancellor taking place over the weekend.

"The government is working at pace on a solution to avoid or minimise damage to some of our most promising companies in the UK and we will bring forward immediate plans to ensure the short-term operational and cashflow needs of Silicon Valley Bank UK customers are able to be met."

The implosion of SVB's US-listed parent company, which has been taken into government control, represents one of the biggest global banking collapses since the financial crisis of 2008.

UK depositors stand to receive up to £85,000 as part of the resolution of the British arm of SVB, sparking fears about the fate of substantial amounts of funding in the start-up community.

"We are working at pace on a solution we will bring forward very soon plans to make sure people are able to meet their cashflow requirements, pay their staff," Jeremy Hunt, the chancellor, told Sophy Ridge on Sunday.

"But obviously what we want to do is to find a longer-term solution that minimises or even avoids completely losses to some of our most promising companies."

On Saturday, dozens of early-stage companies wrote to Mr Hunt to warn of "an existential threat to the UK tech sector".

In a letter seen by Sky News, founders including those from Adzuna, Curve and Thriva called on Mr Hunt to intervene.

"The majority of the most exciting and dynamic tech businesses bank with SVB and have no or limited diversity in where their deposits are held," the draft letter said.

"This weekend the majority of us as tech founders are running numbers to see if we are potentially technically insolvent.

"The impact of this is far greater than our individual businesses.

"The Bank of England's assessment that SVB going into administration would have limited impact on the UK economy displays a dangerous lack of understanding of the sector and the role it plays in the wider economy, both today and in the future."

The founders warned Mr Hunt, who will deliver his Budget statement on Wednesday, that the collapse of SVB UK would "cripple the sector and set the ecosystem back 20 years".

"Many businesses will be sent into involuntary liquidation overnight," they wrote.

"Many other businesses, both in the tech sector and the wider economy - the customers and suppliers of these businesses - will be negatively impacted by these businesses going bankrupt."

Interpath Advisory has been lined up to handle the insolvency process in the UK.