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 are the Top Alternative Investments for 2026?
Read More »: What are the Top Alternative Investments for 2026?In the evolving landscape of alternative investments 2026, several asset classes stand out for their ability to drive capital appreciation, provide stability, and enhance portfolio resilience. As a Boutique M&A and Capital Advisory Firm, we see the following as the…
-
What is Sell-side M&a Advisory?
Read More »: What is Sell-side M&a Advisory?Sell-side M&A advisory is a specialized service that guides business owners and founders through the complex process of selling their company or divesting a business unit. As a Boutique M&A and Capital Advisory Firm, we provide a structured, data-driven methodology…
-
How do I Prepare for Sell-side Due Diligence?
Read More »: How do I Prepare for Sell-side Due Diligence?Preparing for a sell-side transaction requires a disciplined, multi-stage approach to ensure your business is positioned for maximum value and a smooth exit. At Zaidwood Capital, we recommend beginning this preparation at least six to twelve months before you intend…
-
How do I Conduct Buy-side Due Diligence?
Read More »: How do I Conduct Buy-side Due Diligence?To conduct successful buy-side due diligence, we follow a systematic, multi-dimensional investigation that serves as the foundation for risk mitigation and value confirmation. This process goes far beyond a simple financial review to ensure every aspect of a potential acquisition…
-
What is the Buy-side M&a Process?
Read More »: What is the Buy-side M&a Process?The buy-side M&A process is a disciplined, multi-stage framework that acquirers use to identify, evaluate, and close strategic acquisitions. As a Boutique M&A and Capital Advisory Firm, we utilize a structured sequence to ensure every transaction advances your long-term growth…