NAV lending refers to loans secured by the net asset value of a private fund’s holdings — a subset of private credit that has expanded as venture funds hold assets longer before exit.

How it works

NAV lenders — banks, business development companies, and dedicated credit funds — evaluate a fund’s portfolio company marks, diversification, and GP track record. They offer revolving or term facilities with borrowing bases tied to eligible assets. As NAV grows with up rounds, borrowing capacity may increase; write-downs shrink it.

Uses include funding follow-on rounds, covering management company expenses, providing early distributions, or managing cross-fund transfers. Some LPs also use NAV lending on their own fund interests in secondaries markets, separate from GP-level facilities.

Pricing reflects illiquidity: rates sit above public market margin loans, with covenants and reporting requirements that GPs must manage quarterly. Facility size and advance rates often shrink after a vintage suffers widespread write-downs.

Why it matters

• Founders: Funds with active NAV lines may commit to pro-rata or insider rounds more confidently. Conversely, if a fund faces covenant pressure, non-core portfolio support can dry up.
• Investors: LP agreements often cap fund-level borrowing. Understanding NAV lending clarifies whether deployment pace reflects dry powder or leverage — and who bears interest cost (usually the fund).

Common mistake

Equating higher NAV from lending-fueled deployment with stronger underlying performance. Borrowed capital must still generate exits that cover principal, interest, and fund economics.

Related ideas

See also NAV facility, NAV, private credit, and secondaries.