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Explore NAV loans, preferred equity, secondaries and portfolio-company financing for private funds with $100M+ of unrealized assets.
A private fund can hold hundreds of millions of dollars of valuable portfolio companies and still face a liquidity problem.
The issue is simple: net asset value is not cash.
A fund may need capital for follow-on investments, acquisitions, portfolio-company support, expenses, distributions or an approaching fund-life deadline while the underlying investments remain illiquid. Selling a strong asset prematurely can solve the cash problem, but it may sacrifice future value.
That is where portfolio-level liquidity structures become relevant.
Quick Answer: Private funds with $100 million+ of unrealized assets can potentially create liquidity through NAV-based credit facilities, fund-level preferred equity, portfolio-company refinancing, asset-backed facilities, secondary sales or continuation vehicles. The appropriate structure depends on portfolio quality, concentration, existing leverage, fund documents, expected realizations and whether the objective is investment support, LP liquidity or distributions.
Private-market assets do not produce liquidity on demand.
A private equity fund might own six profitable businesses with an aggregate value of $400 million but have only a small amount of unrestricted cash at the fund level.
The GP could still need $20 million for a follow-on acquisition at one portfolio company, another $10 million to protect an investment going through a temporary downturn, and liquidity for investors who have been waiting longer than expected for realizations.
Traditional exit routes may not be attractive at that moment.
Selling a company during a weak M&A market can crystallize a valuation management believes is too low. An IPO may not be realistic. Calling additional LP capital might be impossible because commitments are substantially drawn or the investment period has ended.
Portfolio-level financing creates another option: borrow or raise capital against the economic value already sitting inside the fund.
Institutional Limited Partners Association guidance notes that NAV-based facilities have long been used in secondaries, private credit and real estate and have become increasingly relevant in private equity. ILPA also notes that many LPAs do not expressly address NAV facilities, which makes transparency and GP-LP communication particularly important.
A NAV facility is generally financing underwritten against the value and expected cash flows of an existing portfolio rather than primarily against uncalled LP commitments.
That makes it different from a subscription line.
A subscription facility is generally most useful earlier in a fund's life when substantial callable capital remains. The lender's repayment support is closely tied to investor commitments.
A NAV lender instead looks deeper into the investments already owned.
The lender may analyze individual portfolio-company valuations, leverage, EBITDA, distributions, concentration, exit prospects and the expected timing of realizations. The financing agreement can then establish a borrowing base or other tests determining how much credit remains available as portfolio values change.
ILPA maintains separate guidance for subscription lines and NAV facilities because they create different LP considerations. Its subscription-line guidance specifically focuses on transparency around terms, costs, investor exposure and the effect that borrowing can have on reported fund performance.
A NAV facility therefore should not be described as simply a larger operating line.
Its collateral, repayment and downside cases are connected to an investment portfolio.
The answer depends first on the LPA, side letters, lender documentation and applicable law.
Economically, however, several uses are possible.
A GP might use fund-level financing to complete an accretive acquisition at a portfolio company when equity is temporarily unavailable. It might provide follow-on capital to a portfolio business that is performing well but needs additional time before an exit. Another fund might refinance more expensive obligations or bridge the period between signing a portfolio-company sale and receiving proceeds.
Some managers also consider NAV financing in connection with LP distributions.
That use deserves more scrutiny.
Borrowing to protect or create portfolio value is economically different from borrowing primarily to distribute cash to investors before an actual realization. The second structure can accelerate liquidity, but it also introduces debt that ultimately has to be repaid from future portfolio proceeds.
LPs should therefore understand whether a distribution represents realized investment proceeds or borrowed money.
The headline NAV is only the starting point.
A lender would generally want to understand what produces that value.
A $300 million fund whose value is spread across ten mature, profitable businesses presents a different credit profile from a $300 million fund where one private company represents 65% of NAV.
Concentration matters because the lender cannot diversify away a major asset failure.
Valuation quality matters too. A recent arm's-length financing or sale process can provide different evidence from a valuation based mainly on management forecasts.
Underlying leverage is another major consideration.
If each portfolio company already has substantial senior and junior debt, adding a fund-level facility introduces another claim against the same economic value even if the NAV lender does not hold a direct first lien over operating assets.
That is sometimes called double leverage: leverage exists at both the portfolio-company and fund levels.
Funds evaluating private lending should understand the same underlying credit principles discussed in Mehmi's Canadian overview of private credit structures and underwriting. The transaction size and borrower are different, but cash-flow durability, collateral, leverage and exit capacity remain fundamental credit questions.
Preferred equity can create liquidity without adding a conventional loan.
An investor contributes capital to the fund, an SPV or another agreed vehicle and receives priority economics in return.
Depending on the structure, the preferred investor might receive a priority return of capital, a preferred return, a share of future distributions or other negotiated economics before common equity receives additional proceeds.
The key advantage is flexibility.
Preferred capital does not necessarily require the same scheduled cash interest or principal amortization as debt.
The tradeoff is that the provider participates more directly in portfolio economics.
If the portfolio materially outperforms, preferred equity can ultimately be more expensive than debt.
The GP therefore needs to model not simply the annual preferred return, but the value transferred under several exit scenarios.
Where preferred interests constitute securities, offering and intermediary requirements also become relevant. In Canada, the Canadian Securities Administrators state that firms in the business of trading securities or advising clients generally must be appropriately registered unless an exemption applies.
U.S. and Canadian counsel should review the specific transaction before securities are marketed or transaction-based compensation is agreed with an intermediary.
This is one of the most important decisions in the transaction.
A fund-level solution makes sense when the liquidity need spans several investments or the fund itself needs strategic flexibility.
But if one portfolio company needs the money, borrowing directly at that company can be cleaner.
Suppose a manufacturing portfolio company requires $15 million for inventory, machinery and a new production contract. A combination of receivables financing, equipment financing and cash-flow debt may be economically more appropriate than adding $15 million to a broad fund-level NAV facility.
For Canadian operating companies with strong receivables and inventory, Mehmi's guide to what qualifies for asset-based lending in Canada explains how borrowing-base finance differs from general corporate debt. Its companion comparison of asset-backed lending and traditional business loans helps frame when collateral-driven liquidity can be preferable.
Funds with groups of asset-heavy operating businesses should also consider the principle described in Mehmi's guide to equipment financing for multi-location businesses: long-lived productive assets and short-term working capital often should not consume the same borrowing capacity.
The fund should borrow at the highest level necessary, not automatically at the highest legal entity available.
Potentially.
Imagine a portfolio containing logistics, construction and manufacturing companies with tens of millions of dollars of machinery and fleet assets.
Some of those businesses may own equipment outright.
Instead of borrowing solely against fund NAV, the GP can assess whether portfolio companies can refinance eligible assets or complete sale-leasebacks.
For Canadian assets, Mehmi's guides to equipment cash-out refinancing and when a sale-leaseback works explain why asset value, existing liens, useful life and payment capacity determine usable proceeds.
A fund with U.S. operating businesses should use U.S.-specific underwriting and security analysis rather than importing Canadian rules. Mehmi's current U.S. equipment-financing and refinancing guidance for Memphis businesses illustrates the U.S. treatment of owned productive assets, existing obligations and refinancing.
The broader principle applies at portfolio scale: monetize the asset closest to the cash requirement when doing so creates a cleaner and less expensive structure.
When the real problem is collections timing.
Suppose a portfolio company is profitable but has $25 million trapped in 60-day B2B receivables.
Using fund-level borrowing to solve that issue may add long-term leverage against the entire portfolio for what is fundamentally a short-term working-capital gap.
An ABL revolver or factoring arrangement may be better aligned.
Canadian fund managers can review Mehmi's guide to invoice factoring costs and approval in Canada when evaluating receivable-level alternatives.
The distinction matters because financing should match the duration of the underlying need.
Temporary working-capital assets generally deserve revolving or self-liquidating financing. Permanent fund needs deserve longer-duration capital.
A continuation vehicle provides another route to liquidity when a GP believes one or more assets should be held longer.
Instead of selling the portfolio company to an unrelated buyer, the existing fund can sell the investment into a new vehicle managed by the same sponsor.
Existing LPs are generally presented with options that can include selling their interest or rolling value into the continuation structure, depending on the transaction.
The attraction is clear: investors who want liquidity can potentially receive it while the GP retains an asset it believes still has substantial upside.
The conflict is equally clear.
The GP is connected to both sides of the transaction.
ILPA's 2026 draft continuation-vehicle guidance therefore places particular emphasis on process integrity, conflicts management, pricing validation, transparency and giving LPs sufficient information to make their sell-or-roll decision. The public comment period on that draft closed on August 5, 2026, and ILPA said final updated guidance was still forthcoming.
A continuation fund is not simply financing.
It is a transaction involving asset transfer, valuation, investor elections and often new third-party capital.
Sometimes the cleanest liquidity solution is to sell.
A GP may sell one portfolio company, a strip of several assets or an investor interest rather than adding leverage.
The economic decision should compare the discount associated with selling today against the interest, fees, covenants and future refinancing risk associated with borrowing.
Debt tends to be more compelling when the portfolio has credible near- or medium-term realizations and the financing bridges timing.
A sale can be more prudent when the fund's path to realization is uncertain or when taking on new debt would merely postpone a difficult valuation decision.
Liquidity financing should create time for value realization, not conceal the absence of an exit.
This example is hypothetical. It is not a Mehmi Financial Group financing offer, lender quote, investor proposal or indication of available terms.
Assume a U.S. private-equity fund has six remaining portfolio companies with an aggregate reported NAV of US$400 million.
The GP wants liquidity for follow-on investments and portfolio support without selling an asset immediately.
Assume a lender establishes a US$60 million NAV facility and the fund initially draws US$50 million.
For illustration, assume the drawn amount carries 9.5% annual cash interest, payable quarterly, with no scheduled principal amortization and a three-year maturity.
The quarterly interest payment would be US$1.1875 million.
Annual cash interest would be US$4.75 million.
If the entire US$50 million remained outstanding for three years, cash interest would total US$14.25 million.
Now assume a hypothetical 1.5% upfront fee on the US$60 million commitment, equal to another US$900,000. Legal, diligence, valuation, unused-line and other potential costs are excluded.
The fund would therefore incur approximately US$15.15 million of assumed interest and upfront fee expense over three years before repaying the US$50 million principal.
The practical cash-flow question is more important than the stated 9.5% rate.
If exits are delayed, the fund still needs approximately US$4.75 million each year just to service cash interest. If the expected realizations do not occur by maturity, the fund may need to sell assets, refinance the NAV facility or obtain another source of capital.
That is why expected exit timing belongs in the underwriting model from day one.
NAV lenders can focus heavily on portfolio tests rather than only corporate EBITDA covenants.
A facility may address minimum NAV, loan-to-value, concentration, eligible investments, asset dispositions, additional leverage, distributions and mandatory repayment from realizations.
A lender may also haircut or exclude investments that become impaired, highly concentrated, excessively leveraged or otherwise fail eligibility standards.
The practical risk is procyclicality.
If portfolio values fall during a weak market, borrowing capacity can decline at exactly the point when the fund wants additional liquidity.
Managers should therefore stress-test what happens if one major asset is marked down significantly.
The answer should not be, "the lender will probably waive it."
Potentially a great deal.
The fund's governing documents may limit how much debt can be incurred, how long it may remain outstanding, what collateral may be pledged and what proceeds can be used for.
Side letters can create additional obligations.
Even where borrowing is technically permitted, LP expectations matter.
ILPA's NAV guidance emphasizes transparency around the rationale, key terms, costs, risks and uses of the facility because the effect on LP economics differs substantially depending on why the debt is being incurred.
Managers should therefore review the LPA and investor obligations before treating NAV as available collateral.
The addressable market is substantial, although the SEC data covers a specific U.S. reporting population.
The SEC's latest published Private Fund Statistics dashboard reports 58,891 private funds on Form PF and US$29.6 trillion of gross assets for 2025 Q4. The SEC notes that Form PF generally covers SEC-registered advisers with at least US$150 million in private-fund assets under management, so the figures should not be treated as a count of every private fund in the United States.
The scale helps explain why fund-level liquidity has developed into a specialized financing market rather than being treated as ordinary commercial lending.
Borrowing may be the wrong answer when the portfolio requires repeated capital merely to sustain structurally impaired businesses.
It can also be problematic when one asset dominates NAV, valuations have not been tested recently, existing portfolio-company leverage is already aggressive, the fund lacks a credible realization timeline or the proposed borrowing primarily shifts future proceeds forward without creating additional value.
Managers should also ask whether the financing transfers risk between LPs.
For example, a debt-funded distribution may benefit investors seeking immediate cash but reduce proceeds available from future exits.
The right question is not "How much can we borrow against NAV?"
It is "What does this borrowing accomplish, and what happens if our realization timeline is wrong by two years?"
No. Subscription facilities are generally supported primarily by uncalled LP commitments. NAV facilities rely more heavily on the value and expected cash flows of existing portfolio investments.
Potentially, but the answer depends on its governing documents, side letters, applicable law and lender requirements. The end of the investment period does not itself establish borrowing authority.
Some structures may permit it, but debt-funded distributions require careful consideration of fund documents, lender terms, disclosures and LP economics. Borrowed cash should not be confused with realized investment proceeds.
Not inherently. Preferred equity can reduce scheduled debt-service pressure, but the investor receives priority economics and the eventual cost can be substantial when portfolio values rise strongly.
Structures vary. Security can sit at the fund, holding-company or SPV level and may involve rights to distributions or investment interests rather than direct first-priority security over every operating asset. The exact collateral and perfection requirements require jurisdiction-specific counsel.
Potentially, but a cross-border structure introduces different entity, collateral, tax and legal regimes. U.S. UCC concepts cannot simply be substituted for Canadian PPSA rules, and Quebec requires separate civil-law analysis.
Expect detailed fund financials, organizational documents, portfolio valuations, portfolio-company financials, capitalization and debt schedules, distribution histories, exit assumptions, fund cash flows, remaining commitments, side-letter considerations and concentration analysis. Requirements vary materially by lender and structure.
It depends on the expected value of retaining the asset versus the all-in financing cost and downside risk. Borrowing can bridge a temporary mismatch, but selling may be more prudent when an exit timeline is uncertain or leverage is already high.
For a portfolio-level liquidity analysis, the useful starting point is the actual source of value and cash rather than the fund's headline NAV.
When contacting Mehmi Financial Group, be prepared to discuss the financing amount, whether the relevant entities are in the United States or Canada, the applicable states or provinces, the use of funds, fund and portfolio structure, portfolio-company leverage, available operating-company collateral, expected timing of realizations and the required transaction timing.
Mehmi Financial Group is a financing brokerage and intermediary, not a direct lender, securities dealer or investment bank. Mehmi can help evaluate applicable private-credit, asset-based, equipment-refinancing and operating-company financing requirements. Institutional NAV facilities, fund preferred equity, continuation vehicles and securities placements may require specialized fund-finance lenders, legal advisers and appropriately registered capital-markets intermediaries.
Call 833-863-4644 or use the verified Mehmi Financial Group contact page to discuss the financing requirement.
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