Operations and vendors

NAV facility

Also called NAV loan, NAV-based facility, asset-backed fund financing.

Definition

A NAV facility is a loan to a fund secured on the net asset value of its portfolio investments, or on the cash flows from them, rather than on uncalled LP commitments, typically arranged after the investment period to fund follow-on investments, support portfolio companies or make distributions ahead of exits.

Updated October 9, 2026Checked against our editorial standards

Example

A fund in year seven has a NAV of $300M across eight companies and only $12M of uncalled commitments, too little to support a subscription line. A lender advances $45M, a 15% loan-to-value, secured on the portfolio. The GP uses $20M for a follow-on round and distributes $25M to LPs. The covenant requires repayment or extra collateral if loan-to-value passes 25%. Eighteen months later two companies are marked down and NAV falls to $150M; loan-to-value is now 30%, the covenant is breached, and the fund must sell or repay. The $25M distribution lifted DPI when it was paid, but the loan ranks ahead of LPs on every exit until it is cleared.

Confused with

Subscription line. Secured on commitments LPs have not yet funded, used early in a fund's life for short bridging. A NAV facility is secured on what the fund already owns.

Portfolio company debt. Borrowing at the company level, with recourse to that company only. A NAV facility sits at the fund level and is cross-collateralised across the whole portfolio.

In practice

LPs ask three questions: what the money is for, what it costs, and whether the GP consulted the LPAC. A facility that funds a value-adding follow-on reads differently from one that funds a distribution to improve the fund's numbers before a fundraise. ILPA's guidance on NAV-based facilities asks GPs to disclose purpose, terms and recourse and to seek LPAC approval where the LPA is silent, and many LPAs now address the point directly.

Related terms

Subscription line (capital call facility)A subscription line is a revolving credit facility, secured on the limited partners' uncalled commitments and the general partner's right to call them, that a fund draws to pay for investments and expenses before calling capital from LPs and repays from the later capital call.
NAV (net asset value)NAV, net asset value, is the value of a fund's assets, with investments carried at fair value, less its liabilities at a reporting date, and equals the total of all partners' capital accounts.
Distribution waterfallA distribution waterfall is the sequence in which a fund's proceeds are allocated between limited partners and the general partner, typically return of contributed capital first, then a preferred return to LPs, then a catch-up to the GP, then the remaining profit split at the carried interest rate.
Recallable distributionsRecallable distributions are amounts distributed to limited partners that the limited partnership agreement allows the general partner to call again, usually proceeds returned within a set period of the investment or capital returned before it was invested, so the distribution restores unfunded commitment instead of permanently reducing it.