NAV Lending Explained: Liquidity Solutions for Private Equity in 2025

NAV lending has transitioned from an obscure tactic to a frontline strategy in private equity’s evolving financial playbook.

Amid prolonged holding periods and capital constraints, fund managers are using NAV-based credit both as a lifeline and a lever.

In this article, we break down how NAV lending works, why it matters in 2025, and how it’s reshaping portfolio decision-making.

We’ll explore real-world use cases, highlight key risks, present up-to-date market data, and offer clear answers for LPs and GPs alike.

This is a modern guide to a liquidity solution that’s no longer a last resort—but a proactive financial strategy.

Why NAV Lending Is Booming in 2025

The growth of NAV lending isn’t accidental—it’s a response to liquidity bottlenecks and an economic landscape still adjusting post-pandemic.

Exit markets remain tight. IPO windows are sporadic. M&A deals are cautious and delayed.

According to McKinsey’s 2025 Global Private Markets Review, total exit value dropped 18% compared to 2023, while average holding periods extended to 6.7 years.

Faced with mounting pressure to return capital, private equity funds now turn to NAV-based loans as a way to meet liquidity demands without selling strong assets too soon.

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What Makes NAV Lending Different from Traditional Fund Finance

Unlike subscription credit lines—secured by LP commitments—NAV lending is backed by the actual equity value of the fund’s portfolio companies.

This structural difference shifts the underwriting process entirely. Lenders evaluate the performance, diversification, and resilience of existing holdings—not the fund’s fundraising power.

NAV lending typically suits funds in the later stages of their life cycle, when portfolios are mature but exit events remain distant or suboptimal.

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How NAV Lending Works in Practice

Let’s say a private equity fund holds five portfolio companies valued at a combined $300 million in net asset value. The fund needs $40 million in liquidity to support two follow-on investments.

Instead of forcing a premature exit, the fund secures a NAV lending facility. A credit provider offers financing at 30% LTV (loan-to-value), unlocking up to $90 million.

The proceeds can be used to fund operations, refinance debt, or return capital to investors.

Here’s a simplified table of a standard NAV loan structure:

A Strategic Liquidity Buffer, Not a Bailout

Think of NAV lending as a reservoir in a drought-prone region—it won’t change the climate, but it gives fund managers enough water to keep the system functioning.

Used wisely, it’s not a sign of weakness—it’s a sign of strategic foresight. By avoiding discounted exits or forced secondaries, GPs can hold assets longer and target better outcomes.

A Real Example of Tactical NAV Lending

In early 2024, a European mid-market PE fund faced pressure to distribute capital. One portfolio company was thriving but still 18–24 months away from IPO.

Rather than liquidate early, the GP secured a $60 million NAV-based loan, using part of the proceeds for a strategic bolt-on acquisition and the rest for a partial LP distribution.

Eighteen months later, the company went public at a valuation 42% higher than initial projections—preserving alpha for the entire fund.

NAV Lending Is Now Institutional

Firms like 17Capital, Ares, Apollo, and Blue Owl have built robust NAV lending platforms.

According to 17Capital’s 2024 report, global NAV loan volume grew by over 40% year-over-year, surpassing $60 billion in total transactions.

That number confirms a shift: NAV finance is no longer niche. It’s an institutional-grade solution with pricing, risk modeling, and legal frameworks tailored for private capital.

The Benefits: More Than Just Liquidity

NAV lending offers several strategic advantages:

• Exit Optimization – GPs can delay exits until markets are more favorable.
• Non-Dilutive Capital – No need to sell equity or bring in secondary buyers.
• Improved IRR Management – Timely capital returns smooth internal rates of return.
• Operational Continuity – Helps companies navigate capex cycles without selling equity.

A PitchBook survey in late 2024 found that 62% of fund managers now consider NAV loans a standard part of their capital toolkit.

Risk Factors: Not All NAV Loans Are Equal

As with any leveraged solution, NAV loans come with risks. If portfolio values fall or exits are delayed beyond expectations, funds may breach loan covenants.

Some lenders require quarterly NAV reassessments or impose maintenance tests that can trigger repayment demands.

Transparency, third-party valuation, and cash flow forecasting are essential. Misuse or misalignment with LP expectations can create tension—or worse, impair returns.

What LPs Think in 2025

Initial skepticism among Limited Partners has largely faded—especially as transparency and governance standards improved.

Organizations like ILPA have helped normalize NAV lending by promoting disclosure protocols, risk metrics, and alignment tools for fund finance.

Many LPs now see NAV loans as a form of "value continuity”—not a red flag. Used in moderation, it signals strategic agility, not desperation.

Read ILPA’s official Fund Finance Best Practices Guide

Original Example: Tech-Driven Fund Extends Runway

A US-based tech-focused PE fund used NAV lending in 2024 to inject $25 million into a high-growth SaaS startup that had missed Series D timelines.

Instead of raising dilutive external capital or selling early, the fund preserved its full stake and helped the company reach profitability in early 2025—tripling its valuation.

NAV Lending and the Future of Private Equity Liquidity

In a world where timing can make or break fund performance, NAV lending is becoming essential. It’s not a replacement for exits—it’s a buffer, a bridge, and a bargaining chip.

By unlocking value already created, funds gain breathing room to manage timing, optimize deal flow, and protect investor outcomes.

As institutional support grows and regulation catches up, NAV-based credit is likely to expand further, especially in mid-size and growth equity funds.

FAQ: Frequently Asked Questions about NAV Lending

What is NAV lending?
It’s a loan secured by the net asset value of a fund’s portfolio, enabling GPs to access liquidity without selling assets prematurely.

Who provides NAV loans?
Specialized credit providers like 17Capital, Ares, Apollo, and Blue Owl are leading players in this space.

How is it different from subscription lines?
Subscription lines are backed by investor commitments; NAV loans are secured by actual portfolio holdings and NAV performance.

What are the risks involved?
NAV declines, breached covenants, or exit delays can trigger loan restructuring or margin calls. Proper structuring and oversight are critical.

Do LPs support the use of NAV loans?
Increasingly, yes—when the strategy is transparent, aligned with fund terms, and used to enhance—not mask—portfolio performance.

Marcos Alves 22 de July de 2025