NAV Loans Explained: The Loan Making Wall Street Investors Furious

NAV loans explained: how private equity funds borrow against the companies they own, what it costs, and why so many investors are furious about it. In August 2023, Vista Equity Partners put $1 billion into Finastra, one of its companies. Bloomberg later reported that the billion was borrowed, through a NAV loan led by Goldman Sachs and backed by the value of Vista's private equity holdings. Inside the Fund is the US Tax Desk series on how funds work and where the money goes. This video walks through what NAV (net asset value) is, how a NAV loan is built (two SPVs, the security, loan-to-value tests, cash sweeps and cross-collateralization), what it costs compared with a subscription line, PIK interest, why funds use NAV loans, the cash drought behind the boom, how borrowed payouts lift DPI, who really pays the interest, recallable distributions, carry and clawback, borrowing limits, ILPA's July 2024 guidance, and the case lenders and managers make in their defense. Time Index: 00:00 Vista's $1 Billion Loan 00:58 What We'll Cover 01:18 What Is NAV? 02:02 How a NAV Loan Is Built 02:55 Loan-to-Value 03:42 The Cash Sweep 04:35 What It Costs 05:17 Why Funds Use Them 06:00 The Cash Drought 06:43 DPI: Real Money Back 07:42 Who Pays the Interest? 08:19 Strings Attached 09:22 ILPA's Guidance 10:17 The Defense 10:44 Good or Bad? Sources: ILPA, "NAV-Based Facilities: Guidance for Limited Partners and General Partners" (July 2024): https://ilpa.org/wp-content/uploads/2... Bloomberg, "Vista Puts Up $1 Billion of Preferred Equity to Help Portfolio Company Finastra" (1 Aug 2023): https://www.bloomberg.com/news/articl... Bloomberg, "Vista Used Debt to Finance $1 Billion Finastra Equity Injection" (14 Sep 2023): https://www.bloomberg.com/news/articl... The Paypers, "Vista's Finastra secures a USD 5.3 billion private loan" (22 Aug 2023): https://thepaypers.com/fintech/news/v... Bain & Company, Global Private Equity Report 2025 Also in Inside the Fund: Private Equity Explained: How $40 Becomes $70    • Private Equity Explained: How $40 Becomes $70   How PE Funds Get Their Money: Fund Finance, Part 2    • Subscription Lines Explained: How PE Funds...   The full US fund tax glossary: https://us-taxdesk.com/glossary Educational content only, not tax, legal or investment advice. Talk to a CPA or tax attorney about your own situation. Free glossary, plain-English explainers and in-depth articles on US fund tax: https://us-taxdesk.com Get new explainers by email: subscribe at https://us-taxdesk.com Found this useful? Buy us a coffee: https://ko-fi.com/ustaxdesk Follow us on X: https://x.com/US_TaxDesk Subscribe to US Tax Desk:    / @us-taxdesk   US Tax Desk explains US fund tax for professionals in private equity, private credit and real estate. Music: The Devil's Defiance by Ritchie Everett (Epidemic Sound) #USTaxDesk #InsideTheFund #PrivateEquity