NAV facility is a structured credit agreement that lets a fund borrow against the estimated value of its portfolio — a liquidity tool that has grown more common in venture and private equity.

How it works

A lender advances cash up to a percentage of fund NAV — often 15–25% of eligible assets, varying by lender and portfolio quality. The GP uses proceeds to make new investments, support follow-ons, pay expenses, or occasionally bridge distributions to LPs. Repayment comes from exit proceeds, refinancing, or LP capital calls if permitted.

Terms include interest rate, advance rates per holding, concentration limits, and covenants tied to NAV levels or diversification. Private company marks are the collateral’s foundation, so lenders diligence valuation policies and may haircut individual names.

NAV facilities differ from capital call facilities, which borrow against uncalled LP commitments rather than marked portfolio value. Some funds use both, which increases complexity in quarterly reporting and LP disclosures.

Why it matters

• Founders: A GP with facility capacity may move faster on follow-ons or extension rounds. Facility stress during a downturn can also make a fund more conservative on new checks.
• Investors: LPs should read the LPA and side letters for borrowing limits, disclosure, and whether leverage enhances returns or adds tail risk if exits delay and marks compress.

Common mistake

Assuming NAV borrowing is free liquidity. Interest, fees, and covenant triggers are real costs; over-reliance can force sales or capital calls in adverse markets.

Related ideas

See also NAV, NAV lending, capital call facility, and fund leverage.

Related ideas

Full guide: Subscription line vs NAV financing.