Posh have also agreed to allow Torres to play in FA Cup ties - the Imps were drawn at home against either Cambridge United or Ilkeston Town in last weekend's First Round draw.
"We've done a deal far more conducive to ourselves," Imps vice-chairman Bob Dorrian told Radio Lincolnshire.
"His initial loan period is until 28th December and then from 1st January until 8th May we take him on a standard loan.
"We have also got clearance to play him in the FA Cup so all in all it is a big step forward for Lincoln City."