- NAV loans can provide the liquidity that allows a fund to fully realize its potential.
- With 30+ years of fund banking experience and the largest team in the market, SVB is uniquely positioned to help.
In today’s environment of higher interest rates and longer hold periods, we’re seeing private equity fund managers and CFOs increasingly turn to net asset value (NAV) loans to generate liquidity. It’s easy to understand why. As we've discussed in depth, NAV loans use a fund’s investment assets as collateral, which often allows funds to secure financing at a lower rate than would be possible by incremental borrowing against one or more individual portfolio companies. The additional capital provided by a NAV loan has a variety of potential purposes. Most often, we see funds use it to support existing portfolio companies (e.g., through add-on acquisitions or to provide working capital) or to make a new platform investment.
Many private fund managers and CFOs find NAV loans especially beneficial in the later stages of a fund’s life cycle when they’re looking to capitalize on new opportunities and most of their limited partner (LP) capital has already been allocated. NAV loans allow general partners (GPs) to access cost effective, fund-level debt capital – providing a solution that is non-dilutive and allows LPs to retain upside.
Why SVB?
With 30+ years of fund banking experience and the largest team in the market, we have thousands of client firms and hundreds of dedicated Global Fund Banking team members. Our specialized NAV lending team within Global Fund Banking helps private fund GPs and CFOs evaluate and optimize NAV-based financing. NAV loans often co-exist with SVB-provided capital call line of credit (CCLOC) facilities, providing a one-stop offering that is unique in the market. This approach allows for the optimal financing mix of NAV and CCLOC debt without the need for complex restructuring.
Here’s what to expect when you work with us.
1. NAV loans expertly tailored to your needs
At SVB, we’re not limited by specific security or strategy requirements when negotiating a NAV loan. We can accommodate multiple types of investments a fund may hold, as well as multiple types of fund structure. When you work with us, we avoid asking you to shift your fund investments to a new structure, which can be a time-consuming, expensive and challenging process.
Flexibility in fund investments…
- Direct investments in operating companies
- LP interests in co-mingled funds, co-investments, or continuation vehicles
… and fund structure
- Investments held directly by fund vehicle
- Investments held through subsidiaries
- Investments held through parallel investment funds or alternate investment funds
- Combination of the above
Moreover, NAV loans from SVB can operate in tandem with an SVB-provided capital call line – something not all NAV lenders are able to offer. Using a NAV loan and a capital call line together can meaningfully reduce the weighted average cost of your leverage.
2. A straightforward process
Partnering with SVB for a NAV loan is straightforward. We start with a conversation to determine whether we’re the right partner for you. From that conversation to the closing of the deal takes about six to ten weeks on average.
3. Competitive pricing
Every NAV loan we make at SVB is unique, customized to the specific situation and goals of the fund we’re working with. Each term sheet we create is reviewed by our credit department, ensuring a high degree of confidence that we will execute on the terms of the loan presented. And the cost of a NAV loan from SVB tends to be attractive relative to market rates.
4. A relationship that goes beyond a single transaction
Many funds that work with us to secure NAV loans already have a relationship with SVB. For others, securing a NAV loan is the beginning of our partnership. In either case, we consider NAV financing in light of a fund’s total financial picture. We offer holistic solutions—calling capital efficiently, managing cash flows globally, financing ownership buyouts and more—that can support you before, during, and after the lifespan of the loan.
What our partners say
We’re proud to have a long and growing list of funds that have worked with us to secure NAV loans. The following examples give a sense of the different ways we are helping CFOs find the capital they’re seeking.
|
West Coast lower middle market private equity fund NAV loan purpose: Time-sensitive follow-on investment A West Coast lower middle market private equity fund needed an infusion of liquidity to make an attractive and time-sensitive follow-on investment. The NAV loan we offered the fund gave it the capital to make this investment immediately. But it also gave the fund the ability to draw additional capital in the future for more add-on opportunities if they arose. The fund manager took advantage of this ability to pursue further opportunities, something that would not have been possible without the NAV loan proceeds (insufficient uncalled capital remained). “When we were looking for a NAV loan, speed of execution was paramount,” says the fund’s CFO. “SVB was able to thoroughly vet and execute a deal within a tight timeframe, addressing significant structural challenges, including tax issues, that arose during the process.” |
|
Midwest growth equity fund NAV loan purpose: Additional support for portfolio companies A Midwest-based growth equity firm came to us looking for a NAV loan late in a fund’s life cycle. The fund held a diverse portfolio of early-stage companies that the manager wanted to continue to support, seeing several attractive opportunities to build on existing positions in a dislocated market environment. We secured a loan for the fund, allowing it to take advantage of these opportunities. Investing additional capital in certain companies also allowed the fund to significantly improve its ownership position in these companies at preferred terms. “SVB really took the time to understand our unique investment approach, our specific set of investments and the structure of our fund,” says the firm’s CFO. “The team’s thoughtful approach to a collateral investment strategy allowed us to achieve our goals.” |
|
East Coast secondary fund manager NAV loan purpose: Support for additional investments An East Coast secondary fund manager with an existing SVB capital call line wanted to extend the amount of capital at its disposal to make additional investments. We leveraged our extensive knowledge of the fund’s total financial picture to secure a loan that made sense for the fund’s needs. Since then, we’ve secured two more NAV loans for the fund, each of which we were able to close quickly given our NAV team’s experience with its structure and holdings. “We appreciated SVB’s ability to provide a NAV loan on top of a subscription line,” says the fund’s COO. “Together, the two lines of financing allowed us to optimize the weighted average cost of our leverage.” |
How you can work best with SVB
Before reaching out to SVB to further explore NAV facilities, be sure to understand:
- What the fund's limited partner agreement (LPA) permits
- What discussions, if any, have been had with LPs about the use of a NAV facility
- Whether there are particular tax sensitivities, such as unrelated business taxable income (UBTI) that need to be taken into account
- How fund investments are held
- Finally, a NAV loan underwrites the portfolio investments. We will need to understand the specifics of those investments before we can provide indicative terms.
Learn more about SVB's NAV loan solutions.
If you’d like to discuss your situation with us, we welcome hearing from you. Click on our names in the author section below to email one of us.
