Bridging loans are a type of short-term financing that can be used to bridge a gap in funding between the purchase of a new property and the sale of an existing property or to fund short-term financing needs for businesses. Here’s how they typically work:

1. Application: The borrower applies to a lender or broker, providing information about their financial situation, the purpose of the loan, and the collateral that will be used to secure the loan.
2. Valuation: The lender will typically conduct a valuation of the property or collateral used to secure the loan to determine its value.
3. Offer: If the lender is satisfied with the borrower’s financial situation and the collateral, they will make an offer outlining the loan terms, including the amount, interest rate, and any fees or charges.
4. Acceptance: If the borrower accepts the offer, they will sign a loan agreement and provide any additional documentation the lender requires.
5. Disbursement: Once the loan agreement is signed, the lender will disburse the funds to the borrower. The borrower can then use the funds for the intended purpose, such as purchasing a new property or funding a business.
6. Repayment: Bridging loans are typically short-term loans with a term of 12 to 18 months, and the borrower is expected to repay the loan in full, along with any interest and fees, at the end of the term. The borrower may also repay the loan early, in whole or in part, if they can secure long-term financing.

It’s essential for borrowers to consider their financial circumstances carefully and needs before taking out a bridging loan and to work with a reputable lender or broker who can provide clear and transparent information about the terms and conditions of the loan, as well as any associated fees.