--- title: "NAV Lending (NAV Facility) | Altss Glossary" description: "NAV lending is lending to a private fund, or to a vehicle that holds its investments, secured on the net asset value of the fund's existing portfolio…" canonical: "https://altss.com/glossary/nav-facility" --- Glossary · Security / instrument # NAV Lending (NAV Facility) Also called: NAV loan · net asset value loan · NAV-based facility NAV lending is lending to a private fund, or to a vehicle that holds its investments, secured on the net asset value of the fund's existing portfolio rather than on investors' uncalled commitments. Publisher: Altss LLC Published 2026-01-08 Content modified 2026-10-01 ALTSS-CREDIT-033 Late in its life a fund has called most of its commitments but owns a portfolio worth far more than its cash. A NAV loan lets it borrow against that portfolio to support companies it owns, fund follow-on deals, bridge to exits or make distributions. The lender is repaid from the portfolio's cash flows and exits, and its protection is the gap between the loan and the value of the investments. ## Formula ### Loan-to-value of a NAV facility ``` LTV = facility outstanding / eligible NAV ``` `Facility outstanding` drawn principal, plus any capitalised PIK interest `Eligible NAV` the reported value of the investments that qualify under the facility, after exclusions and concentration limits (for example caps on the largest asset) Eligibility rules, concentration haircuts and the valuation basis (GP marks, lender-adjusted or third-party) are negotiated per facility. Two facilities at the same headline LTV can carry very different risk. ## How a NAV facility is structured - **Borrower and security.** The borrower is the fund or, more often, a holding vehicle beneath it to which the investments are contributed. Portfolio companies and underlying fund interests often restrict transfers, so security usually takes the form of pledges over the holding vehicle's equity, its bank accounts and the distributions it receives, not over the assets themselves. - **Terms.** A maximum [loan-to-value](https://altss.com/glossary/loan-to-value) (LTV) ratio, LTV levels at which cash sweeps step up, eligibility criteria and concentration limits, and valuation rights that let the lender challenge marks or require a third-party valuation. - **Tenor and pricing.** Multi-year terms, priced well above [subscription lines](https://altss.com/glossary/subscription-line) because the collateral is illiquid portfolio value rather than investor promises to pay. Some facilities allow interest to be paid in kind. ## What NAV loans are used for - defensive or follow-on capital for portfolio companies; - add-on acquisitions; - bridging to an exit that has been agreed but not closed; - refinancing portfolio-company debt; - funding distributions to LPs before exits occur. The last use is the one the Institutional Limited Partners Association (ILPA) singles out in its 2024 guidance (see below). It raises [DPI](https://altss.com/glossary/dpi) with borrowed money, the borrowing is secured on all the remaining assets, and the interest cost falls on LPs. Whether loan-funded distributions count toward the [preferred return](https://altss.com/glossary/preferred-return) and carry depends on the limited partnership agreement (LPA). ## The fund-finance family NAV facilities are one member of fund finance, not a synonym for it: - **Subscription lines** are secured on uncalled commitments and used early in a fund's life. - **NAV facilities** are secured on the portfolio and used later. - **Hybrid facilities** combine both kinds of collateral. - **GP financing** lends to the manager or its partners, not the fund. - **LP-level NAV loans** lend to an investor against its fund interests. The term "NAV lending fund" refers to the lender: a credit strategy that provides these loans. ## ILPA guidance (July 2024) ILPA published *NAV-Based Facilities: Guidance for LPs and GPs* on 25 July 2024. It covers private equity funds only, not NAV facilities in secondaries, private credit or real estate funds. It recommends: - consent of the limited partner advisory committee (LPAC) before a facility is put in place where the LPA is silent on such borrowing; - LPAC consent whenever proceeds will fund distributions. The guidance is in five parts: a market overview, LP concerns, recommendations, proposed LPA language, and recommended disclosures. ## How LPs assess a NAV facility - **Permission.** Does the LPA allow fund-level borrowing, and within what limits (share of commitments or NAV, maximum term)? - **Purpose.** What is the stated purpose, and is there an exit plan to repay? - **Full cost.** Margin, fees and any payment-in-kind (PIK) interest. - **Cross-collateralisation.** Do sweeps or defaults let one asset's decline divert proceeds from the whole portfolio? - **Distribution treatment.** How are loan-funded distributions treated in the waterfall? - **Reporting.** Is performance reported with and without the facility? In its April 2024 Global Financial Stability Report, the International Monetary Fund (IMF) lists multiple layers of leverage and stale or subjective valuations among the vulnerabilities of private credit. A NAV loan adds fund-level leverage on top of portfolio-company debt, secured on GP marks. ## Worked examples ### Illustrative facility at inception A buyout fund holds ten companies with eligible NAV of $1,000m and borrows $150m. LTV is **15%**. ### Same facility after a 30% fall in NAV If eligible NAV falls to $700m (marks fall, or the largest asset breaches a concentration limit and is excluded), LTV rises to **21.4%** with no new borrowing. Suppose, for illustration, that the facility steps up its cash sweep at 20% and defaults at 25%. The fund must now send a larger share of exit proceeds to the lender, including proceeds from companies that are performing. Examples are illustrative; figures are not market data. ## Not the same as - [Subscription Line of Credit](https://altss.com/glossary/subscription-line): A subscription line is secured on LPs' uncalled commitments and is short-dated. A NAV facility is secured on the existing portfolio and repaid from exits. - GP Financing: GP financing lends to the manager or its principals. A NAV facility lends to the fund or its holding vehicle. - Preferred Equity (Secondaries): NAV-based preferred equity buys a priority share of portfolio distributions instead of lending. It is equity, with no fixed maturity or debt remedies. ## Common mistakes - Treating "fund-level credit facility" as a synonym for NAV facility. The term also covers subscription lines and hybrids. - Reading DPI from loan-funded distributions as realised performance. - Looking at headline LTV without the eligibility and concentration rules that define the denominator. - Assuming the LPA permits NAV borrowing because it permits subscription lines. ## Edge cases - Secondaries funds and funds of funds borrow against portfolios of fund interests. Transfer restrictions in the underlying LPAs shape how security is taken. ILPA's 2024 guidance does not cover these funds. - A NAV loan used to fund a GP-led continuation vehicle or a tender can substitute for a secondary sale. ## Sources 1. [NAV-Based Facilities: Guidance for LPs and GPs](https://ilpa.org/resources-tools/resource-library/nav-based-facilities-guidance/). Institutional Limited Partners Association, ILPA, Published 25 July 2024. Status: Current (checked 2026-10-01). Scope; recommendations; Parts 1-5 — supports: PE-only scope; LPAC consent where the LPA is silent and whenever proceeds fund distributions; structure of the guidance; published 25 July 2024 2. [Global Financial Stability Report, April 2024, Chapter 2: The Rise and Risks of Private Credit](https://www.imf.org/-/media/files/publications/gfsr/2024/april/english/ch2.pdf). IMF staff (team led by Caio Ferreira and Nobuyasu Sugimoto), International Monetary Fund, April 2024 GFSR ("The Last Mile"), published 16 April 2024. Status: Published (checked 2026-10-01). Chapter 2, executive summary — supports: Multiple layers of leverage and stale or subjective valuations among the vulnerabilities of private credit ## Related terms 6 terms - [Subscription Line of Credit](https://altss.com/glossary/subscription-line) - [Loan-to-Value (LTV)](https://altss.com/glossary/loan-to-value) - [Distributions to Paid-In (DPI)](https://altss.com/glossary/dpi) - [Limited Partner Advisory Committee (LPAC)](https://altss.com/glossary/lpac) - [Net Asset Value (NAV)](https://altss.com/glossary/net-asset-value) - [Recallable Distributions](https://altss.com/glossary/recallable-distributions) ## Referenced by 4 terms - [Dividend Recapitalization](https://altss.com/glossary/dividend-recapitalization) - [Secondaries](https://altss.com/glossary/secondaries) - [Secondary Pricing](https://altss.com/glossary/secondary-pricing) - [Special Purpose Vehicle (SPV)](https://altss.com/glossary/spv-special-purpose-vehicle) ## Concept record Concept ID ALTSS-CREDIT-033 Classification Security / instrument · Strategy Topics Private credit · Fund structures Version 2.0.0 Last reviewed 2026-10-01 Structured data [JSON](https://altss.com/reference/concepts/nav-facility.json) ## Canonical URL https://altss.com/glossary/nav-facility