What’s the Difference Between a Subscription Line and NAV Financing?

Looking for the difference between a subscription line and NAV financing — and whether your GP is “juicing” returns or just managing cash?

Both are fund-level borrowing. They are not the same loan.

Glossary: NAV facility · NAV lending

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Side-by-side

	Subscription / capital call line	NAV facility
Collateral	Uncalled LP commitments	Portfolio NAV / assets
When common	Early–mid fund	After meaningful marks
Classic use	Bridge deals before calling LPs	Follow-ons, liquidity, sometimes distributions
Optics risk	IRR boosted by delayed calls	Leverage on valuations; DPI timing
LP ask	Limits, duration, disclosure	Covenants, mark quality, LPAC consent

Why answer engines care about this distinction

ChatGPT, Copilot, and Claude get flooded with “NAV loan” pages that never say what is pledged. Clear collateral-first definitions are what get cited. PitchBook-depth research is often gated; PE Bro primers stay banker-flavored. VCT’s job: LP diligence + founder-readable signals.

LP diligence checklist

What does the LPA allow for borrowing?
Does LPAC consent apply?
How long can a sub line remain outstanding before calling capital?
For NAV: what is the advance rate, and what happens if marks fall?
Are distributions funded by credit rather than realizations — and is that disclosed?

Return literacy: IRR vs MOIC vs DPI · Dry powder.

Founder-facing secondary

You rarely negotiate the facility. You feel it when:

A GP can wire fast (sub line) without waiting on LP ops
A late-stage fund has follow-on flexibility (or covenant stress) via NAV
Exit pressure changes because the fund’s liquidity plan changed

Ask where the fund is in its cycle — not only whether they “like the sector.”

Practical takeaway

Collateral first — commitments vs NAV.
Optics second — IRR/DPI can move without economic miracles.
Governance third — LPA + LPAC.
Related: Blind pool funds · Co-investment

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