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.
Related FAQs
-
What is Cyber Security Consulting?
Read More »: What is Cyber Security Consulting?Cyber security consulting is a specialized field that provides organizations with expert guidance to protect their digital assets from evolving threats. It involves a range of services designed to help businesses navigate complex regulatory landscapes and mitigate potential data breaches.…
-
What is the Final Offering in the Gen Ai Practice?
Read More »: What is the Final Offering in the Gen Ai Practice?The final offering in the generative AI practice at Zaidwood Capital consists of integrated platforms that provide end-to-end advisory support. These offerings combine advanced techniques, such as agentic AI and multimodal fine-tuning, to deliver comprehensive financial services. Specific components of…
-
What are Generative Ai Tools?
Read More »: What are Generative Ai Tools?Generative AI (Gen AI) tools are a transformative subset of artificial intelligence designed to create original content—such as text, images, code, and financial models—based on patterns learned from vast datasets. Unlike traditional AI, which primarily focuses on analyzing existing data…
-
What is Generative Ai Technology?
Read More »: What is Generative Ai Technology?Generative AI (Gen AI) is a transformative subset of artificial intelligence designed to create original content rather than simply analyzing existing data. While traditional AI excels at pattern recognition, prediction, and classification, generative AI uses machine learning to produce new,…
-
What is Gen Ai and Agentic Ai?
Read More »: What is Gen Ai and Agentic Ai?Based on the provided content, the definitions and differences between Generative AI and Agentic AI are as follows: Generative AI Generative AI is a subset of artificial intelligence designed to create original content, such as text, images, and code. Unlike…