As an LP, Should You Hire an Advisor for a NAV Loan or Go It Alone?

At F2H, we bring white-glove advisory to secondaries, capital raising, and M&A under $150m—delivering the sophistication of top-tier investment banking to small GPs, LPs, and companies. If you’re thinking of taking on a NAV loan, contact us today to start the conversation.

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Introduction

Limited partners (LPs) increasingly use Net Asset Value (NAV) loans to unlock liquidity from private fund and asset portfolios. A NAV loan allows an LP to borrow against the value of its fund commitments, portfolio of fund interests, or other private assets without selling them outright in the secondary market.

But when pursuing this type of financing, LPs face a crucial decision: should they negotiate a NAV loan directly with lenders, or hire an advisor to structure and manage the process? The answer influences pricing, terms, execution certainty, and the LP’s relationship with fund managers.

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What “going it alone” means for LPs

• Direct lender outreach: LPs contact banks, specialty finance firms, or private credit providers directly.
• Negotiation: The LP manages discussions on advance rates, covenants, interest rates, and reporting requirements without third-party help.
• Documentation: Internal teams handle term sheets, legal structuring, and collateral mechanics, supported by outside counsel.
• Small cost savings: No advisory fees (often in the low single-digit percentage of loan proceeds).
• Risks: Limited access to the full lender universe, less negotiating leverage, and more internal time commitment.

Going alone is most feasible for large, sophisticated LPs with existing lender relationships and the bandwidth to negotiate directly.

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What an advisor brings to the NAV loan process

Market access and lender relationships

• Broad knowledge of active NAV lenders across banks, insurance companies, and private credit funds.
• Insight into which lenders have appetite for specific collateral structures (single fund, multi-fund, or portfolio).

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Benchmarking and structuring

• Advisors know current advance rate ranges, interest spreads, covenants, and reserve requirements.
• They can help tailor facility terms to maximize flexibility and minimize restrictive covenants.

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Competitive tension

• By engaging multiple lenders simultaneously, advisors can create competition and improve pricing.

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Execution support

• Advisors manage data requests, diligence, and communication flow with lenders.
• They coordinate legal and tax structuring, including pledges, SPVs, and cash control accounts.

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Governance and optics

• For institutional LPs (e.g., pensions, endowments), using an advisor provides fiduciary cover by showing a competitive, market-tested process.

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Pros of hiring an advisor

• Better pricing and terms: Competition often improves advance rates and lowers spreads.
• Execution certainty: Advisors identify lenders with proven track records for NAV loans.
• Time savings: Internal staff can focus on investment activities while the advisor manages lender discussions.
• Structuring expertise: Advisors optimize repayment flexibility, covenants, and collateral structures.
• Fiduciary protection: A structured, advisor-led process demonstrates care and prudence to boards or investment committees.

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Costs and downsides of hiring

• Fees: Advisors may charge 1–5% of loan proceeds, depending on size.
• Not always necessary: For standard, relationship-driven loans, advisors may add little value.

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When going alone makes sense

• Strong existing relationships: LPs with long-standing banking relationships may secure favorable terms without outside help.
• Experienced internal teams: Sophisticated LPs with in-house finance and legal staff can handle lender negotiations directly.

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Decision framework

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Best practices if hiring

• Select specialists: Work with advisors who have closed NAV loan transactions, not just traditional M&A bankers.
• Align incentives: Push for fees tied to successful closing, not large upfront retainers.
• Control confidentiality: Ensure advisors limit lender outreach to prevent market leaks.
• Engage early: Bring advisors in before negotiating exclusivity with any lender.
• Stay involved: LPs should still set key parameters on leverage, pricing thresholds, and lender selection.

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Conclusion

For LPs, NAV loans are a flexible alternative to outright sales, providing liquidity while maintaining long-term fund exposure. The decision to hire an advisor depends on the complexity of the portfolio, the size of the facility, and the LP’s internal capabilities.

Advisors can add meaningful value by improving terms, ensuring execution certainty, and protecting fiduciary responsibilities—particularly for large or complex facilities. Smaller, relationship-driven loans, however, may be negotiated effectively without external support.

Ultimately, LPs should weigh advisory fees against the potential gains in pricing, structure, and execution that advisors bring.

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At F2H, we bring white-glove advisory to secondaries, capital raising, and M&A under $150m—delivering the sophistication of top-tier investment banking to small GPs, LPs, and companies. If you’re thinking of taking on a NAV loan, contact us today to start the conversation.

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