NAV financing in private equity is a fund-level, asset-backed credit facility secured by a fund’s net asset value—the fair market value of its portfolio companies—rather than by uncalled limited partner capital commitments. We view these facilities as critical tools for middle-market sponsors to access liquidity tied to a diversified asset base without forcing the sale of underlying holdings.
Lenders, such as private credit funds or specialty finance providers, evaluate the portfolio, apply a “haircut,” and typically extend credit at advance rates between 20% and 40% of the fund’s NAV. These facilities are used strategically throughout the post-investment period for several key purposes:
- Accelerating Distributions: We advise general partners on using these facilities to return capital to limited partners (LPs) ahead of anticipated exit timelines, which can improve the fund’s IRR.
- Funding Add-on Acquisitions: Sponsors use proceeds to supplement equity for bolt-on deals without issuing new capital calls, enabling synergetic growth.
- Managing Liquidity Gaps: Facilities provide a reservoir of capital to cover operating expenses, bridge delays in exits, or support general corporate purposes.
- Capitalizing Continuation Vehicles: Supporting the transition of assets into new vehicles while preserving ownership.
As a Boutique M&A and Capital Advisory Firm, we help sponsors structure these facilities to align with their fund’s lifecycle and growth objectives. While NAV financing offers significant flexibility, it is a form of fund-level leverage that increases gearing, meaning it can amplify both gains and losses.
Disclaimer: This website is for informational purposes only and is not an offer, solicitation, recommendation, or commitment to buy or sell any security or financial product. Securities are offered through Finalis Securities LLC; Zaidwood Capital is not a registered broker-dealer and is unaffiliated with Finalis.
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