Coventry City have failed to pay £1m due in rent on the stadium and the city council has agreed a financial package to assist ACL, the company jointly-owned by the council and the Alan Edward Higgs Charity.
The move was unanimously agreed at a full council meeting, with the local authority explaining the move on their official website.
"Coventry councillors have voted unanimously to support a new loan arrangement for Arena Coventry Limited at a meeting of Full Council today (Tuesday 15 January)," read the statement.
"The meeting - held in private because of commercial confidentiality - saw councillors support a proposal for the Council to intervene to safeguard the Ricoh Arena - a publicly funded asset that has helped to drive growth and create jobs since it first opened.
"The move means the Council is effectively becoming banker to ACL, so that it can pay off its current loan arrangements with its existing bank. There is no net cost to the Council or Coventry taxpayers; the move will provide a modest surplus for the Council.
"As a result, the interest that ACL now pays on its loan will go to the Council, some of it helping to support jobs and services, the remainder helping to service the loan rather than to the bank.
"No cash is being put into CCFC by the Council as this would be unlawful and inappropriate."
Cllr John Mutton, Leader of Coventry City Council, was upbeat about the plan.
"We have taken a decision that will benefit city taxpayers and secure the future of one of our most important and best loved public assets that brings great benefits to Coventry people," he said.
"Not many councils would have done what we've done, but I've always believed that councils can - and should - be prepared to take bold and radical decisions when they are the right thing to do.
"It's up to ACL and the club now to find a way forward on the rent issue; we know that ACL is totally committed to doing this, and we hope the club's owners will be committed to doing so, too."