Sydney's beleaguered light rail project has been thrown into further controversy after the NSW Government revealed taxpayers may have to bail it out.

Key points: The consortium building Sydney's light rail project took out a $500m loan form private banks

The consortium building Sydney's light rail project took out a $500m loan form private banks The NSW State Government admitted it is guarantor for the loan

The NSW State Government admitted it is guarantor for the loan If the project collapses, the NSW taxpayer will have to pay back the loan

The Berejiklian Government admitted on Friday it was guarantor on a $500 million loan provided by private banks to the ALTRAC Light Rail Partnership, the consortium behind the project.

It means if ALTRAC goes under, NSW taxpayers are in line to pay back the loan.

The admission came after Labor announced they had "leaked" documents from sources within the NSW Department of Transport that they believed showed the Berejiklian Government was lending $500 million to the company.

It led to a fiery exchange in the state's budget estimate hearings, with Transport Minister Andrew Constance initially refusing to respond to repeated questions from Labor.

Mr Constance later clarified the loan to ALTRAC was from the private sector and "will be paid back".

NSW Transport Minister Andrew Constance was in the middle of the fiery exchange ( AAP: Dan Himbrechts )

"The NSW Government is not loaning the funds, but is providing a guarantee on the drawn down portion of the loan," he said.

The light rail project has been shrouded in controversy and legal battles, with more than 60 businesses this week joining a class action suit seeking around $40 million in compensation over disruption caused by the project.

In April, Acconia, a subcontractor building the project with the ALTRAC consortium, revealed it was taking the NSW Government to court, claiming it was owed $1.2 billion.

The Government said it hoped to complete the project in 2019, but there was no final cost yet.

"We don't know when it'll be finished, and we don't know what it'll cost," Labor deputy leader Michael Daley said.

"It is the worst project in Australian history."