What is NAV Financing?
NAV financing is a loan to a fund secured by the value of its portfolio (net asset value) rather than uncalled LP commitments. Funds use it late in their life — after commitments are drawn — to fund follow-ons, support portfolio companies, or accelerate distributions to LPs.
NAV financing sits at the opposite end of the fund lifecycle from a subscription line. Once a fund is fully invested and has little uncalled capital left, it can borrow against the value of the portfolio itself — typically 5-25% loan-to-value against a diversified pool of assets. Proceeds fund follow-on investments, shore up portfolio companies, or finance distributions to LPs ahead of actual exits.
The market grew rapidly through the mid-2020s as slow exit markets left funds holding mature portfolios longer than planned. It is also debated: using NAV loans to pay distributions returns cash to LPs but adds leverage on top of assets LPs already own, and effectively borrows from tomorrow's exits. ILPA has issued guidance urging GPs to disclose and seek LPAC consultation on NAV facilities, and many LPs now ask about NAV-financing policy in due diligence.
Also known as: NAV loan, NAV lending, net asset value financing