NAV Loan Structuring Tips: Strategies for Structuring a NAV Loan

NAV lending has become a more active part of private market financing as sponsors and growth-stage companies look for liquidity without immediate equity dilution. The structure works well when asset value is strong but cash flow visibility is uneven.

According to Oaktree Capital, NAV financing activity rose roughly 30% year-over-year in North America and 20% in Europe in 2023, with total deal flow more than doubling between 2020 and 2023 to reach $44 billion.¹

The challenge is not access to NAV financing. The challenge is structuring the facility in a way that preserves flexibility through different market conditions. A poorly structured NAV loan creates pressure at the wrong point in the cycle. A disciplined structure gives companies additional runway without constraining operations or future financing activity.

For a broader overview of NAV financing (including its role in today's private credit market, growth drivers, and lender ecosystem) see our earlier piece: NAV Financing: Fund-Level Leverage in a Changing Private Credit Market.

Focus on Asset Quality First

Every NAV facility starts with the underlying asset base. Lenders spend most of their time underwriting valuation quality, liquidity profile, concentration risk, and downside recovery scenarios.

A defensible valuation process matters. Sponsors with transparent reporting, independent valuations, and diversified portfolios usually achieve better pricing and more flexible covenant packages.

Asset volatility also matters more today than it did two years ago. Lenders are placing greater emphasis on revaluation mechanics and liquidity coverage, particularly in venture-backed and growth equity portfolios.

Loan-to-Value Discipline Matters

The most aggressive structure is rarely the best structure.

Higher LTVs increase short-term liquidity but reduce flexibility if valuations reset or exits slow. Conservative structures leave more room to manage through market volatility without triggering covenant pressure or forced asset sales.

NAV facilities typically carry LTV ratios in the 10% to 25% range for private equity, with more concentrated or credit-focused portfolios sometimes reaching higher thresholds depending on asset quality and diversification.²

In the current environment, lenders are prioritizing downside protection over maximum deployment. Borrowers should expect closer scrutiny around concentration limits, portfolio performance, and valuation methodology.

Structure Covenants Around Real Operating Conditions

Many growth-stage businesses operate with uneven revenue cycles and shifting capital needs. Covenant structures should reflect that reality.

Rigid maintenance tests create unnecessary pressure during periods of investment or slower liquidity realization. More flexible structures around reporting thresholds, valuation timing, and liquidity reserves create a more stable financing framework over the life of the facility.

According to a 2024 Rede Partners survey, roughly 60% of LP respondents indicated they are not receiving sufficient information about NAV facilities, making proactive reporting a structural advantage, not just a best practice.³

The strongest NAV facilities are built around realistic operating assumptions, not best-case projections.

Align Repayment Terms with Liquidity Timing

Repayment schedules should match expected portfolio realizations and cash generation timelines.

Interest-only periods, delayed amortization, and bullet maturities are increasingly common in sponsor-backed NAV facilities because they reduce pressure during periods of active deployment or portfolio expansion.

A mismatch between repayment timing and liquidity events creates refinancing risk that becomes difficult to manage in tighter credit markets.

Maintain Active Lender Communication

NAV lenders want transparency, especially during periods of market volatility.

Consistent reporting around portfolio performance, valuation changes, and liquidity position helps maintain lender confidence and improves flexibility if amendments or refinancing discussions become necessary later in the process.

The relationship dynamic matters more in NAV lending than in traditional corporate facilities because the collateral base itself changes over time.

A Practical Example

According to 17Capital, around 89% of existing NAV loans have been deployed for growth-oriented purposes such as expansion capital or add-on acquisitions, while only 11% have funded distributions back to investors.⁴

Consider a late stage venture-backed technology platform holding a portfolio of minority investments across several emerging and growth tech companies.

The company needs additional capital to support product expansion but wants to avoid raising equity in a weaker valuation environment.

After completing an independent portfolio valuation, the company secures a $15 million NAV facility against a $50 million asset base. The structure includes a moderate LTV, quarterly valuation reporting, and an interest-only period aligned with expected liquidity events across the portfolio.

The facility provides growth capital without immediate dilution while preserving operational flexibility during a slower exit environment.

Key Risks to Manage

The biggest risk in NAV lending is valuation deterioration.

If portfolio values decline materially, borrowers can face tighter liquidity conditions, increased collateral requirements, or covenant breaches. Concentrated portfolios are particularly exposed during periods of market dislocation.

Well-structured facilities can be built with covenant headroom capable of withstanding NAV declines of up to 47.5% before lenders absorb losses ahead of LP equity in stress scenarios.⁵

Documentation also matters. NAV facilities involve detailed collateral, reporting, and valuation provisions that directly affect operational flexibility throughout the term of the loan.

Borrowers should focus as much on downside protection and structural flexibility as they do on pricing.

Final Thoughts

NAV loans have become a more established financing tool across private markets, particularly as sponsors look for alternatives to equity issuance in a slower exit environment.

17Capital estimates $70 billion in NAV finance deployment in 2025, with the broader market potentially reaching $145 billion out of a total addressable market of $700 billion by 2030.⁵

The best structures balance liquidity access with long-term flexibility. That requires disciplined underwriting, realistic valuation assumptions, and repayment structures aligned with portfolio cash flow timing.

In the current market, lenders are still active in NAV financing, but underwriting standards are tighter and structures are more selective. Borrowers who approach the process with transparency and realistic leverage expectations are securing materially better outcomes.

About Axis Group Ventures

Axis Group Ventures is a boutique investment banking and strategic advisory firm. We focus on global debt placement and private market secondaries for venture- and private equity-backed companies. Our firm partners with founders, CFOs, and investors to provide customized capital solutions in the private markets. We leverage deep experience in private credit and a global network of capital providers. Axis Group Ventures' mission is to bring greater transparency and alignment to complex financing decisions through disciplined, independent advisory and high-touch execution. For more information, visit www.axisgroupventures.com.

Sources:

1. Allvue Systems. Exploring NAV Lending in Private Equity. January 9, 2025. https://www.allvuesystems.com/resources/nav-lending/

2. White & Case. Net Asset Value Finance Gains Ground with Infrastructure Managers. May 12, 2025. https://debtexplorer.whitecase.com/leveraged-finance-commentary/net-asset-value-finance-gains-ground-with-infrastructure-managers

3. The Drawdown. How Much NAV Lending Is Really Going On? June 18, 2024. https://the-drawdown.com/article/how-much-nav-lending-is-really-going-on

4. With Intelligence. NAV Lending: Reshaping Private Credit & Equity. August 15, 2024. https://www.withintelligence.com/insights/nav-lending-reshaping-private-credit-equity/

5. Moonfare. NAV Loans: Net Asset Value Financing in Private Equity Explained. April 2026. https://www.moonfare.com/blog/what-is-nav-lending

Disclosures & Disclaimers

This blog post is provided by Axis Group Ventures for informational and educational purposes only. It does not constitute investment, legal, accounting, or tax advice, and should not be relied upon as such. Nothing contained here should be interpreted as an offer to buy or sell any securities. Any actual offer or solicitation will be made exclusively through formal documentation provided by the relevant issuer or seller.

Axis Group Ventures is not a registered broker-dealer and does not execute, negotiate, or recommend the purchase or sale of securities. Any introductions or private-market support provided by Axis Group Ventures are conducted strictly in an advisory and consulting capacity. Readers should conduct their own due diligence and consult qualified professionals before making any financial decisions.

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