NAV Loans for Independent Sponsors

Independent sponsors are a core market for Nodem. A sponsor who has closed three or four platform deals owns something most lenders cannot see and no bank will lend against: a portfolio of co-investment stakes, carried interest and fee rights spread across several holding companies, each one locked up until exit. We lend against that portfolio. Facilities run from $10m to $100m and above, secured on the holding company that owns the sponsor’s interests, repaid from exits and distributions, and sized so that a markdown in one deal does not become a problem in the others. This page sets out who we lend to, how the deals we see are structured, where the money runs out, and the six ways sponsors use a NAV loan, with an honest note on when it is the first call and when it is the fallback.

Last reviewed November 2026.

Why independent sponsors are a core market for us

The independent sponsor model, where a deal team finds a company, signs it, and then raises the equity deal by deal rather than from a committed fund, has grown from a niche into the most active buyer group in the lower middle market. Headway Capital Partners’ 2025 survey puts the number of active independent sponsors at 2,500 to 3,000 in the US and more than 500 in Europe, with Houlihan Lokey estimating about $65bn of independent sponsor transaction volume in 2025, up from $31bn in 2023 [1]. McGuireWoods, which runs the largest conference in the market, counts about 1,400 active sponsors by its own stricter definition, double the 2019 figure, and its 2025 conference drew about 1,600 people, six times the 2017 attendance [2]. In Europe the model goes by other names, deal-by-deal investor, fundless sponsor, pledge fund, and is younger, but 58% of European sponsors in the Headway survey said there was more deal flow than capital to fund it, against 18% in the US [1].

The deals are mid-sized. In McGuireWoods’ survey of nearly 300 closed transactions, more than three quarters had an enterprise value between $10m and $75m and an equity cheque between $5m and $50m, and two thirds were priced below six times EBITDA [3]. Most sponsors target companies with less than $15m of EBITDA, close one deal a year from about a hundred reviewed, and have closed a median of two platforms and one or two add-ons since starting out [1].

Those numbers describe our borrower. A sponsor with two to four platforms, each with an equity cheque of $5m to $50m, owns interests worth a few million to a few tens of millions of dollars that cannot be sold and that a bank will not finance. That is the gap we exist to fill.

How independent sponsor deals are structured

The economics are consistent enough across deals to describe. The sponsor signs the company, then brings in a capital partner, usually a family office, a dedicated independent sponsor fund, a mezzanine or SBIC fund, or a control private equity fund, to provide most of the equity [3]. At closing the sponsor earns a closing fee, most commonly 2% of enterprise value, and in about 60% of deals rolls more than half of it, often all of it, into equity alongside the capital partner [3]. The sponsor then earns a management fee, most commonly 5% of trailing EBITDA with a floor around $200,000 to $300,000 and a cap below $1m, and a carried interest, or promote, that in most deals steps up through MOIC hurdles: typically 10% to 15% after a first hurdle of 1x to 2x, rising to 20% to 25% after the second and up to 30% after the third, with a full catch-up in about three quarters of cases [3].

Each deal sits in its own holding company with its own capital partner, its own waterfall and its own timetable. After three or four deals the sponsor’s balance sheet is a collection of minority co-investment stakes, accrued but unpaid carry in several waterfalls, and a stream of management fees that pays the team but not much more. Everything of value is illiquid and everything arrives at exit, which the sponsor does not control.

Where the money runs out

The same survey work that sizes the market also names the constraint. Fundraising is the hurdle sponsors rank first, a considerable proportion of transactions fail for want of equity, and sellers and advisers treat sponsors as higher execution risk because the money is raised after signing [1]. In practice the pressure arrives at five points.

Between signing and closing. The seller wants certainty of funds. The capital partner’s commitment is conditional and its paper is slow. The sponsor is personally on the hook for broken-deal costs in a large minority of deals [3].
The sponsor’s own cheque. Capital partners increasingly expect the sponsor to invest real money alongside them, not only a rolled fee. The money the sponsor has is in the last three deals.
Between fees. A management fee floored at $250,000 a deal does not fund a five-person team through a year without a closing. The carry that would fund it is years away.
Add-ons. The platform needs a bolt-on and the capital partner is at its allocation limit, or will only fund it on terms that dilute the sponsor’s promote.
The capital partner itself. A seeder or anchor who took a share of the sponsor’s management company or promote in the early years wants to be bought out, or a capital partner in a mature deal wants to exit before the sponsor does.

Every one of these is a timing problem. The sponsor is not short of value. It is short of value it can use this quarter.

What a NAV loan is, for an independent sponsor

A NAV loan is a term loan to the holding company that owns the sponsor’s interests, secured on that company and the accounts that receive its distributions, and sized against the independently verified value of what it holds. For a sponsor the pledged pool is some combination of co-investment stakes in portfolio companies, accrued carried interest where the hurdle has been cleared or is close, and in some cases the management fee stream. Nothing at the portfolio company level moves: no new lender at the operating company, no change to the capital partner’s position, no consent from the senior lender in most cases, because the pledge is taken one level up.

We advance 15% to 30% of eligible value as a standard range. Co-investment stakes in companies with verified marks and visible exit paths sit at the top. Promote that is in the money is included at a discount for timing and waterfall risk; promote below its hurdle receives little or no value. Fee streams count where the fund documents allow the fee to be assigned. The loan runs one to five years, interest is paid in cash or capitalised, and it is repaid from exits and distributions as they come. Our indicative pricing, size and term ranges are on the NAV loan parameters page.

What we cannot do is lend against a single company. A sponsor on its first platform does not yet have a portfolio, and for that sponsor the right routes are the ones the market already provides: a capital partner, preferred equity, an SBIC or mezzanine fund, or a seller note. From the second or third deal onwards, the picture changes.

Six ways independent sponsors use NAV loans

Each of these is drawn from situations we have seen, with the details changed. For each one I say whether a NAV loan is usually the first call or the alternative.

1. Certainty of funds between signing and closing

A sponsor with three platforms signs a fourth, a $40m enterprise value deal with a $14m equity cheque. The capital partner is committed in principle but will not fund until its own investment committee has met and its documents are agreed, which is six weeks after the seller’s deadline. A $10m facility against the sponsor’s holdco, which holds its stakes in the first three platforms, funds the equity at closing. The capital partner comes in afterwards and the facility is repaid from its subscription, or stays in place to fund the sponsor’s own co-invest. The seller got a buyer with cash; the sponsor kept the deal.

Route one when the sponsor has a portfolio and a capital partner who is slow rather than absent. Alternative to an equity bridge from the capital partner itself, which usually costs a larger share of the promote.

2. Funding the sponsor’s co-invest in deal four against deals one to three

The capital partner on a new deal wants the sponsor to put in $3m of its own money, not a rolled fee. The sponsor’s money is in three earlier holdcos, two of them likely to exit within 24 months. A facility against those interests funds the co-invest. The sponsor keeps its full promote in the new deal instead of giving some of it to a co-investor in exchange for the cheque.

Route one for a sponsor with three or more platforms. Alternative to selling part of the promote or borrowing personally.

3. Refinancing a cash-pay facility

A sponsor’s holdco carries a bank or private credit line secured on the same interests at 10% to 15% of value, with cash interest due every quarter against a portfolio that distributes once a year. Replacing it with a NAV loan at a higher advance, with interest capitalised and repaid from distributions, removes the quarterly cash drain and usually releases new capital at the same time.

Route one where the existing line is cash-pay and the portfolio is lumpy. Alternative to a sale of interests to retire the line.

4. Buying out a seeder, anchor or capital partner

Many sponsors gave an early backer a share of the management company or of the promote on every deal in exchange for the first cheque. Five deals later that share is expensive. A facility against the sponsor’s accumulated interests funds the buyout, and the sponsor’s economics return to the partners. The same structure works where a capital partner in a mature deal wants out and the sponsor would rather buy its stake than bring in a stranger.

Route one for a buyout of the management company or promote share, because the alternative, selling a GP stake to a third party, is permanent. Alternative to a secondary sale of the capital partner’s position, which prices at a discount and introduces a new co-owner.

5. Add-ons when the capital partner is at its limit

A platform has a bolt-on in hand at five times EBITDA that would take the combined business to a size the capital partner cannot fund alone. The sponsor’s holdco borrows to fund the sponsor’s share of the add-on equity, or the whole of it as a bridge until the capital partner’s next allocation. The acquisition closes on time and the sponsor’s ownership in the platform goes up rather than down.

Alternative, usually. Route one is the capital partner or a co-investor; the NAV loan is for when they are slow or full and the sponsor does not want to dilute.

6. Runway for the management company

A sponsor with four platforms and $6m of in-the-money carry across them is paying five people from management fees that do not quite cover it, two years before the first exit. A facility against the carry and co-invest interests funds the firm through to the exits. It is the same transaction a larger manager would do with a GP financing lender, scaled to a sponsor.

Alternative. Route one is to raise a committed fund, which 20% of sponsors plan to do once they have a track record [1]. For the 72% who plan to stay deal-by-deal, a NAV loan is the way to fund the firm from what it has already built [1].

Route one or alternative: the short version

First platform, no portfolio yet: first call is a capital partner, preferred equity, an SBIC or mezzanine fund, or a seller note. A NAV loan is not available.
Signing to closing, with a portfolio of two or more deals: a NAV loan against the existing holdcos is route one.
The sponsor’s own co-invest, three or more deals: a NAV loan is route one.
A cash-pay line on the holdco: a NAV loan refinancing is route one.
Seeder, anchor or capital partner buyout: a NAV loan is route one.
Add-on with the capital partner slow or full: first call is the capital partner or a co-investor; a NAV loan is the alternative.
Management company runway: first call is a committed fund; a NAV loan is the alternative.

What a facility looks like

Facilities run from $10m to $100m and above, with most sponsor facilities between $10m and $40m. Advance rates are typically 15% to 30% of eligible value, lower for concentrated or early portfolios and higher for sponsors with five or more platforms and visible exits. Term is one to five years, extendable, with no early repayment penalty. Interest is paid in cash or capitalised; capitalised interest adds up to 100 basis points. Indicative pricing for most facilities is 450 to 750 basis points over SOFR, SONIA or Euribor, with an arrangement fee. Security is a pledge over the sponsor’s holding company and the accounts that receive distributions; recourse is to that company and its assets, not to the partners personally, except where a portfolio is very thin. Every facility is custom and pricing is confirmed only in a signed term sheet.

We give an indication of appetite within three business days of receiving a schedule of the sponsor’s interests, a structure chart and the latest valuations or capital account statements, and a term sheet within a week. Legal documentation and any independent valuation run in parallel, and funding typically follows four to six weeks after the term sheet. A sponsor who already holds its interests through a single holding company with clean reporting closes faster; one who holds them personally or across several entities will usually need to contribute them into a holdco first, which we help with.

What to send us

A one-page schedule of platforms and add-ons with entry date, enterprise value, the sponsor’s co-invest and ownership, the promote terms and current MOIC, and the capital partner on each; a structure chart; the latest valuation or management accounts for each company; and a line on what the money is for and where repayment comes from. That is enough for an answer on size, structure and timing within days.

Questions independent sponsors ask us

Can an independent sponsor get a NAV loan on its first deal?

No. A NAV loan is secured on a diversified portfolio, and one company is not a portfolio. For a first platform the routes are a capital partner, preferred equity, an SBIC or mezzanine fund, or a seller note. From the second or third platform onwards, the sponsor’s accumulated interests can support a facility.

Does the capital partner have to consent?

Usually not. The pledge is taken over the sponsor’s own holding company, not over the portfolio company or the deal vehicle, so the capital partner’s position and the senior lender’s position are untouched. We check each shareholders’ agreement for transfer and pledge language, and notification is sometimes required.

Do you lend against carried interest that has not been paid?

Yes, where the promote is in the money against its hurdle, at a discount for timing and waterfall risk. Promote below its hurdle receives little or no value. Co-investment stakes are the core of most sponsor facilities.

Do you lend to European independent sponsors?

Yes. We lend against portfolios in the US, Canada and Europe, in USD, EUR or GBP, with facilities from $10m in North America and $25m elsewhere. Deal-by-deal investors, fundless sponsors and pledge fund managers are the same borrower to us.

How is a NAV loan different from a capital partner’s equity bridge?

An equity bridge from the capital partner is usually priced in promote: the sponsor gives up a share of its carry for the certainty. A NAV loan is priced in interest, secured on what the sponsor already owns, and leaves the promote intact.

How quickly can you fund?

Indication within three business days, term sheet within a week, funding typically four to six weeks after the term sheet. Sponsors with a clean holding structure have closed inside a month.

Sources

Headway Capital Partners, Inside the Independent Sponsor Market: Insights from Our 2025 Survey, fieldwork October to December 2025 (survey 63% Europe, 37% US). https://www.headwaycap.com/wp-content/uploads/2026/02/2025-Headway-Independent-Sponsor-Market-Whitepaper-1.pdf
McGuireWoods, Bloomberg Highlights McGuireWoods’ Dominance in Booming Independent Sponsor Market, 29 July 2026, reporting Bloomberg, 28 July 2026. https://www.mcguirewoods.com/news/in-the-news/2026/7/bloomberg-highlights-mcguirewoods-dominance-in-booming-independent-sponsor-market/
McGuireWoods, Independent Sponsor Deal Survey Summary and Analysis (Deal Study 2), nearly 300 transactions closed 2018 to 2021, May 2022. https://media.mcguirewoods.com/publications/2022/Independent-Sponsor-Survey-May2022.pdf
Lippes Mathias, By the Numbers: What the Latest Independent Sponsor Report Reveals About the Market, 22 March 2026. https://www.lippes.com/insights/by-the-numbers-what-the-latest-independent-sponsor-report-reveals-about-the-market-3080

General information, not advice. Nodem Capital is an FCA-authorised AIFM (fund manager). Nodem Ltd is authorised and regulated by the Financial Conduct Authority, FRN 1017481.

Talk to the decision maker

If you are a GP working against a capital call, a deal deadline or a cash flow pinch, email me directly at abranton@nodem.com with the outline and the date you need to fund. I will tell you quickly and honestly whether we can hit it.