A COMPLETE GUIDE TO NAV FINANCE

NAV finance, or net asset value finance, is a form of fund-level borrowing that allows investment funds to raise debt against the value of their underlying portfolio. It’s one of the fastest-growing tools in private capital, used by fund managers to manage liquidity, support portfolio companies, and extend the life of maturing funds without forcing early exits. In this guide, we cover what NAV finance is, how it works, when funds use it, and what lenders look for when structuring a NAV facility.

What is NAV finance?

NAV finance is a credit facility secured against the net asset value of a fund’s investment portfolio. Rather than borrowing against uncalled capital commitments, as with a subscription line, a NAV facility looks to the value of the fund’s existing investments as its primary source of security.

The facility is typically structured as a revolving credit facility or term loan, with the amount available to draw linked to the fund’s NAV at any given time. As the value of the underlying portfolio rises or falls, so does the borrowing capacity.

NAV finance is most commonly used by private equity, real estate, and private credit funds, though its use has expanded significantly across fund types as managers seek more flexible tools for portfolio management and liquidity.

How does a NAV facility work?

A NAV facility works by giving a fund access to a pre-agreed credit line, sized as a percentage of the fund’s net asset value. The lender takes security over the fund’s portfolio, typically through a pledge over the fund’s assets or a charge over distributions, rather than over the underlying portfolio companies directly.

Key structural features include:

• LTV (loan to value) ratio: the amount drawn under the facility is expressed as a percentage of the fund’s NAV. We typically support LTV’s of c10%-15%.
• NAV covenant: the fund is required to maintain and report a NAV covenant throughout the life of the facility, tracking the aggregate cost assigned to its portfolio investments.
• Interest cover: lenders will assess the fund’s ability to service interest payments, typically looking at gross and net interest cover ratios from the fund’s cash flows and distributions.
• Cash sweep and repayment: NAV facilities typically include mandatory repayment obligations triggered by distributions or liquidation proceeds from the portfolio.

A subscription line, also called a capital call facility, is secured against the uncalled capital commitments of a fund’s limited partners. It’s primarily used early in a fund’s life to bridge the timing gap between making investments and calling capital from LPs.

A NAV facility, by contrast, is secured against the fund’s existing portfolio and is typically used later in a fund’s life, often when uncalled capital has been largely deployed and the fund has a mature portfolio to borrow against.

The two products serve different purposes at different stages of a fund’s lifecycle. Some funds use both: a subscription line in the early years for capital call bridging, and a NAV facility in the later years for liquidity management, portfolio support, or to fund a continuation vehicle.

If you’re at an earlier stage and a subscription line is what your fund needs right now, find out more about subscription lines and our other fund finance products on our Fund Finance page.

NAV finance is a versatile tool. Fund managers typically turn to it for one or more of the following reasons:

• Portfolio company support: providing follow-on capital to a portfolio company that needs additional investment without requiring a new capital call from LPs.
• Fund liquidity: returning capital to LPs ahead of an exit, or bridging a short-term liquidity need without forcing a sale at an inopportune time.
• Extending fund life: supporting a fund that is approaching the end of its investment period but still holds assets it wants to manage through to a better exit environment.
• Acquisition bridging: funding a new investment quickly, ahead of LP capital being called or syndication being completed.
• GP-led restructuring: supporting continuation vehicles or secondary transactions where the fund manager is rolling assets into a new structure.

When assessing a NAV facility, lenders focus on the quality, diversity, and liquidity of the underlying portfolio. Key considerations include:

• The quality of the LP base: whether investors are institutional, government, or family office in nature, and their history of meeting capital commitments.
• Portfolio diversification: a well-spread portfolio with exposure across multiple sectors and geographies is typically viewed more favourably than a concentrated book.
• The fund manager’s track record: a demonstrable history of fund management, including how previous funds have performed and how the manager has handled defaults or distressed situations.
• Existing leverage within the portfolio: lenders will assess the level of debt already sitting within individual portfolio companies, as this affects the overall risk profile of the NAV facility.
• The fund’s distribution history and expected realisation timeline: understanding when and how the fund expects to generate returns is critical to structuring appropriate repayment mechanics.

OakNorth provides bespoke NAV facilities for lower mid-market funds. We focus on the segment that sits between global banks, who prioritise mega-funds and offer little structuring creativity, and boutique lenders who lack the balance sheet to scale. We work with funds typically ranging from £50m to £1bn in AUM, with facility sizes from £5m to £75m.

Our fund finance offering spans three product rails:

• Equity NAV facilities: secured against a fund’s private equity portfolio, providing liquidity without requiring asset sales or LP capital calls.
• Senior secured debt NAV facilities: structured for funds whose portfolios consist primarily of senior secured loans or credit assets, where the underlying loan book provides the security base.
• Hybrid facilities: combining NAV and subscription line elements for funds that need flexibility across both deployed capital and uncalled commitments.

Alongside NAV facilities, OakNorth provides a full range of fund finance solutions including subscription lines, capital call facilities, GP facilities, and liquidity lines. Find out more on our Fund Finance page.

We understand that financing needs evolve across a fund’s lifecycle, from subscription lines in early deployment through to NAV facilities as the portfolio matures, and we structure accordingly. Our team brings genuine sector expertise across private equity, real estate, and private credit, which means we understand portfolio dynamics, not just credit metrics. And unlike traditional banks, we don’t require you to move your banking relationship or open ancillary accounts. Our facilities are standalone: you get the capital you need, without the strings attached.

We also operate differently when it comes to process. Fund managers work directly with our decision-makers through an interactive credit committee, rather than a black-box approval process where answers take weeks and rationale is never explained. This transparency means fewer surprises and faster decisions. We typically complete NAV facilities in 3-6 weeks rather than 3-6 months.

If you’re a fund manager exploring NAV finance options, whether for the first time or looking to refinance an existing facility, get in touch with our fund finance team.

What does NAV stand for in fund finance?

NAV stands for net asset value, which is the total value of a fund’s assets minus its liabilities. In a NAV facility, this figure forms the basis for calculating how much a fund can borrow.

Is NAV finance the same as a subscription line?

No. A subscription line is secured against uncalled LP commitments and is used early in a fund’s life. NAV finance is secured against the fund’s existing portfolio and is typically used later, once capital has been deployed.

What fund types use NAV finance?

NAV facilities are most common in private equity and real estate funds, but their use has expanded to private credit, infrastructure, and secondary funds. They are particularly useful for funds approaching the end of their investment period.

How quickly can a NAV facility be put in place?

At OakNorth, we can typically complete a NAV facility in a matter of weeks from initial discussion to drawdown. The timeline depends on the complexity of the portfolio and the availability of fund documentation.

What is the typical LTV on a NAV facility?

This varies by lender and fund type, but NAV facilities are generally conservative. Drawn debt is typically limited to 10-15% of the fund’s NAV, reflecting the illiquid nature of the underlying assets.

Does OakNorth provide NAV facilities for smaller funds?

Yes. We specifically focus on the lower mid-market, working with funds with AUM of £50m–£1bn that are often underserved by larger institutions. We take the time to understand smaller and more complex fund structures that some lenders won’t engage with.