The government is prepared to allocate Team New Zealand a further $2m but wants to see private sponsorship help tide the America's Cup syndicate over as they sort out a potential challenge for 2017.
TNZ boss Grant Dalton today confirmed the team's resources would expire at the end of June.
They had gained "significant" sponsorship in the past week which he believed met government criteria for survival money to get them through to February.
By then Dalton believed they would have the major sponsorships in place to bankroll a challenge.
Economic development minister Steven Joyce said he was "well aware" of TNZ's precarious position but wanted evidence of private funding before making any commitment.
"My view is if the sponsors are going to join in then now would be a good time to at least put some money on the table so we know there that there are committed commercial sponsors to the America's Cup challenge," Joyce said today.
"We are prepared to put some additional money in - the order of a couple of million - they keep insisting on about five (million). Taxpayers have already put $5m on the table this time around.
"We're prepared to do more but this can not be a government-funded challenge - it must be a private sector-funded challenge, with the government coming in alongside it to the extent that it makes sense from a marketing New Zealand to the world perspective. That's where we sit.
"I'm prepared to look at that, provided they've got the rest of it covered."
Dalton said "we are constantly talking" with the government. The next round of talks will clearly be crucial to a situation that is developing into a Mexican standoff.
After being told by Joyce last week to "go away and line up your money", Dalton believed they had now met that criteria for public funding.
A sponsorship drive over the past week meant they fulfilled "what we can put in the tin".
Dalton claimed that long term TNZ are "in better shape than ever with sponsorships".
But he stressed that the major deals wouldn't materialise until February because they were based on European companies working to their financial year deadlines who wouldn't commit now, especially without the finer details of the America's Cup venue.
TNZ believe the cup can be won, having completed a thorough review of the protocol which provides the rules for the next regatta.
Dalton said there was nothing there to "scare us off" and it's "no less win-able than it was last time".
"Look, they (holders Oracle) are not doing us any favours, it's the America's Cup after all. But it isn't that bad".
TNZ's first Cup deadline is a US$1m entry fee on August 8.
Dalton said "there is no point paying your entry fee if you can't make it (long-term)".
Dalton didn't want to get dragged into a mud-slinging contest with Oracle skipper Jimmy Spithill who has twice claimed this week that TNZ's management wasn't up to the job.
Dalton suggested that was more America's Cup gamesmanship from Spithill who had excelled in it during Oracle's miracle comeback in San Francisco last year.
He tried to put some perspective on Spithill's views, likening it to the Wallabies finally winning the Bledisloe Cup and then ringing up NZRU chief executive Steve Tew to tell him who the All Blacks should be putting out on the field next time.
He didn't rule out Spithill's motives as destabilising TNZ but declared: "We are strong, stronger than we've ever been."
They had no issues with being restricted to one AC62 that will be used in the next regatta while Oracle get two. But Dalton said the development work that would go into smaller catamarans to eventually be transferred to the Cup racing boat would be very significant.
TNZ designers were already working on the equations and had the benefit of experience. Again, they were "miles ahead" of where they were in the lead-up to the last Cup which featured foiling catamarans for the first time.
That experience shouldn't be thrown away now and Dalton predicted that not contesting the next America's Cup would mean the end of this country's involvement.
"The start up price is so astronomical that it won't happen again in this country," he said.