What debt is available to financial sponsors?

Private equity funds, especially in later fund lives, often sit on paper value without cash. Selling assets might depress valuation, while raising capital may be slow or dilutive. NAV loans, or fund lines of credit, offer a third path. These are credit lines secured against the current portfolio’s value or yet-to-be-called committed capital from LPs. 

The NAV loan structure ties directly to the fund’s unrealized holdings. The lender doesn’t evaluate a single company but underwrites the entire portfolio. They assess numerous factors including valuation frequency, concentration by sector, sponsor behavior during prior cycles, and exit visibility. Fund LOCs are lines of credit that provide liquidity to the GP based on LP quality, GP experience and performance, sponsor AUM, and the amount of committed capital yet to be called for investment. 

A fund might use the proceeds to support a challenged asset, fund a bolt-on acquisition, or provide limited partner distributions. In some cases, these facilities act as bridge capital during exit processes by extending holding periods while markets recover. 

The market for fund lending is growing. These vehicles provide necessary liquidity to GPs especially as hold periods increase and during times of economic headwinds.