NAV Loans for Venture Capital
Understand how portfolio-backed financing works, how private equity funds use it, and where it can fit into a venture fund’s strategy.
How private equity funds use NAV loans
In private equity, NAV financing is an established portfolio management tool. It is often used later in a fund’s life, during the value creation phase or late in the investment period, when much of the committed capital has been deployed.2
| PE use | What it means in practice |
|---|---|
| Add-on acquisitions2 | Provide capital for an existing portfolio company to acquire another business and pursue its growth strategy. |
| Portfolio support2 | Supply additional capital to an existing investment when the fund’s available reserves are limited. |
| Recapitalization or refinancing2 | Finance changes to an investment’s capital structure, potentially replacing more expensive debt. |
| Liquidity before exits3 | Provide interim liquidity while retaining investments, including financing distributions to LPs in some structures. |
What this means for venture capital
Consider Example Ventures Fund II, a fictional venture fund. It has deployed its capital, but still holds investment rights in portfolio companies it wants to continue backing.
A NAV loan lets a fund in this position use the value it has already built. Turbine’s materials describe these applications.
Follow-on rounds and pro rata rights
Take up the fund’s pro rata allocation in a new round, instead of letting the right lapse.
Increasing exposure
Invest more than the fund’s pro rata share in a selected company, where the round or other shareholders allow it.
Recapitalizations
Join a restructuring of a portfolio company’s capital on terms offered to existing holders.
What a venture portfolio needs evaluated separately
Private equity practice is useful context, but the financing assessment is specific to each portfolio. A venture portfolio differs in four ways.
- Valuation evidence
- Venture valuations may use a recent financing round as an input, adjusted for later performance, market conditions, and the rights of each share class. Lenders look at how well supported each mark is.4
- Concentration in key holdings
- A few companies can hold most of a venture fund’s value. Concentration limits can reduce the borrowing base.
- Expected exit timing
- Venture exits have no fixed date. The loan term has to allow for exits that arrive later than planned.
- Proposed repayment path
- Portfolio companies rarely pay dividends, so repayment usually depends on exits or secondary sales.
A worked example: follow the money
Illustrative only. These assumptions are not Turbine’s terms.
Example Ventures Fund II uses a NAV loan to fund a follow-on investment.
| Item | Illustrative assumption |
|---|---|
| Existing portfolio value, with no other liabilities | $200M |
| NAV loan | $10M |
| Follow-on investment funded | $10M |
| Fixed annual simple interest | 10% |
| Upfront fee | 1% of borrowing |
- The fund borrows $10M.
- It invests the proceeds in an existing portfolio company.
- Assuming the new investment is initially valued at cost, gross investment assets become $210M, with a $10M loan liability.
- NAV remains $200M before fees and interest. Borrowing itself does not create investment value.
- Repayment follows the agreed loan terms as portfolio proceeds become available.
Borrowing adds $10M of assets and $10M of debt. NAV stays at $200M.
Before the loan
After the follow-on
What the financing costs
Holding the loan for two years almost doubles its cost.
After 12 months
After 24 months
- Interest at 10% simple
- Upfront fee, $0.1M
These figures assume unchanged principal, simple interest, no other charges, and that the fee and interest are paid in cash, so the full $10M is invested. Any return on the additional investment has to be weighed against these costs and the added risk. If the new investment failed after one year, the fund would lose $11.1M under these assumptions and would still repay the loan from its other holdings.
Real application: Fin Capital
Turbine transaction
Situation
Fin Capital received an investment opportunity in one of its portfolio companies. A category leader was being recapitalized with structure favorable to Fin and its investors. Fin’s Flagship Fund I was already fully allocated, and raising an SPV would have been slow and uncertain.
Decision
Rather than structure an SPV or allocate the opportunity to a single LP, Fin chose to borrow against the value of its fund.
Execution
Turbine provided NAV financing, so Fin could lead the round immediately without going back to LPs for additional capital.
- RecapitalizationThe existing fund took part, keeping the potential upside for its LPs, after financing costs
- Decisive actionCapital deployed without delay
- No new raiseNo separate investment SPV or fresh equity raise required
Partnering with Turbine to secure a NAV loan was an easy decision. VCs have a fiduciary responsibility to optimize returns for existing LPs. The financing offered attractive terms and allowed us to continue supporting a strong business. Rather than structuring an SPV or allocating the opportunity to a single LP, Turbine’s NAV loan empowered Fin to create immediate value across the fund. We’re always exploring innovative ways to deliver stronger outcomes for our LPs, and NAV financing is another tool we plan to continue leveraging strategically.
Turbine’s NAV loans for venture capitalRead moreCompare the alternatives
A fully deployed fund that wants to make an additional investment has four broad choices. Each one changes who provides the capital, who keeps the upside, and who carries the cost.
| NAV loan | Raise an SPV | Allocate to an LP | Decline | |
|---|---|---|---|---|
| Capital source | A lender, against the existing portfolio | New commitments from LPs or co-investors | The LP’s own capital | — |
| Execution | Credit agreement, lender diligence, and any LPA or LPAC approvals | New legal entity, documents, a raise, and ongoing administration | An agreement with the LP and any company consents | — |
| Who shares the upside | All of the fund’s LPs, after financing costs | SPV investors, after SPV fees and carry | The participating LP only | The fund keeps its existing exposure but forgoes the new investment’s upside. Its ownership may be diluted |
| Who bears the downside | All of the fund’s LPs. The loan is repaid even if the investment fails, so other portfolio proceeds may go to the lender | SPV investors, generally without recourse to the fund’s existing portfolio | The participating LP | No new investment risk. The fund keeps the risk of its existing holding |
| Financing costs | Interest, fees, and legal costs paid by the fund | Formation, legal, and administration costs | Usually none for the fund | — |
| Repayment obligation | The fund repays on the agreed terms, often from exit proceeds | None for the fund | — | — |
| May fit when | The fund wants to keep the upside, has a credible repayment path, and must act on a deadline | There is time to raise, and investors want direct exposure to one company | One LP wants the exposure and the other LPs accept it | The opportunity does not justify the added cost and risk |
Risks, approvals, and repayment
Borrowing adds a creditor ahead of the LPs. Review these points before the fund commits.
Valuation declines and covenants
If portfolio values fall, loan-to-value rises. Crossing an agreed level can require repayment or additional collateral, start a cash sweep, or cause a default.
Concentration and cross-collateralization
Depending on the security package, proceeds from several holdings, including strong performers, may support repayment. A loss in one large holding reduces the borrowing base, and proceeds from strong exits can go to the lender first.
Delayed exits, interest, and maturity
Interest accrues while the fund waits for exits. If exits do not occur before maturity, the fund may have to refinance, sell assets, or agree a monetization plan with the lender.
Cash sweeps and distribution limits
Agreements often direct some or all portfolio proceeds to repayment, and can restrict distributions to LPs until the loan is repaid.
Borrowing permissions and LP communication
The LPA can limit fund-level borrowing, permitted uses, and required consents. LPs expect to know why the fund borrows, how much, and on what terms.
Explore NAV financing for your venture fund
Talk with Turbine about your portfolio, intended use of proceeds, and financing needs.
References
- Bryan Barreras, “What’s in a NAV Loan?”, Cadwalader, October 2024↩
- “NAV Finance 101: The Next Generation of Private Credit”, Oaktree Capital, March 2024↩
- “NAV-Based Facilities: Guidance for LPs and GPs”, ILPA, July 2024↩
- International Private Equity and Venture Capital Valuation Guidelines, IPEV, December 2025↩
This guide is general information. It is not legal, tax, or investment advice, and it is not an offer to lend. Any financing is subject to underwriting, documentation, and the fund’s own approvals.