NAV Loans for Private Equity Funds

NAV loans, or net asset value loans, are financing options specifically designed for private equity funds. These loans are structured so lenders, such as Customers Bank, provide funding to the private equity fund based on the net asset value of its portfolio. This means that the loan amount is determined by the value of the assets held by the fund rather than relying on traditional collateral or creditworthiness assessments. This makes NAV loans an attractive option for private equity funds with insufficient tangible assets to secure conventional loans.

Lending solutions provided by Customers Bank are rooted in a deep understanding of market needs. Our commercial lending products include construction and permanent project financing. Our specialized commercial funding arrangements extend from coast to coast to meet the needs of the industry.

Benefits of NAV Loans

NAV loans for private equity funds offer a significant advantage in terms of flexibility. These loans, based on the net asset value of the fund’s portfolio, allow for the adjustment of the loan amount as the value of the assets fluctuates. This empowers private equity funds to access additional capital when needed, without the hassle of refinancing or securing new loans. 

NAV loans typically have more flexible repayment terms than traditional loans, allowing funds to repay based on their cash flow and investment performance.

NAV loans also provide private equity funds with a secure source of non-dilutive financing. Unlike equity investments or capital calls from limited partners, NAV loans do not necessitate the issuance of new shares or dilution of existing ownership. This security allows funds to control their investment decisions and protect their returns. 

Also, since the fund’s assets typically secure NAV loans, lenders are more willing to provide financing at lower interest rates than unsecured debt options.

Risks and Considerations

However, it is important to note that NAV loans also have certain risks and considerations for private equity funds. One key risk is that if the value of the fund’s portfolio declines significantly, it can trigger a default on the loan. This could result in the lender taking control of the assets or forcing a sale at an unfavorable price. Consequently, it is crucial for private equity funds to carefully assess their portfolio’s stability and potential downside risks before opting for a NAV loan.

Next Steps

NAV loans are a compelling financing option for private equity funds. They enable funds to access capital based on the net asset value of their portfolios, providing them with additional funding without diluting ownership or control. We encourage you to explore financing options from Customers Bank. You may find that we offer attractive loan terms and interest rates. Our experienced loan officers are here to guide you and help take your business to a new level.