What "pricing on a grid" means for a NAV loan

Many NAV loan term sheets do not quote a single interest rate. They quote a grid. The margin over the reference rate changes with the loan to value ratio, so the rate on day one is not the rate you pay if the portfolio marks down or you draw more. Borrowers used to subscription lines, where pricing is usually flat, often read the headline number and miss the schedule underneath it.

One caveat before the mechanics. No two NAV loans are the same. A fund-level facility on a large, diversified buyout portfolio and a holding company facility for a family office with twelve venture funds are different products with different risks, and the pricing can be hundreds of basis points apart. The published benchmarks below are mostly drawn from the fund-level end of the market. Idiosyncratic deals price higher.

The basic mechanics

A NAV facility is sized against the value of the investments rather than against uncalled commitments. Loan to value is the outstanding debt divided by eligible NAV, with the loan documents defining both sides, including whether accrued PIK interest counts as debt and what counts as eligible. For fund-interest portfolios the test usually runs off the latest capital account statements. The pricing grid maps LTV bands to margins, which sit on top of a reference rate such as SOFR or Euribor rather than being the all-in rate.

Travers Smith's guide to NAV facilities, correct as at July 2023, describes the convention as an LTV-linked margin ratchet, usually with three or four steps of 25 to 50 basis points, on a base margin that was then typically 400 to 700 basis points depending on asset profile, diversification, lender and whether the debt can be rated (Travers Smith, Talking Secondaries Part 5). Rede Partners' 2026 survey of lenders puts target margins in a similar 400 to 700 range, with some lenders expecting pricing to rise from here (Rede Partners, NAV Financing Market Report 2026). Those are surveyed targets over the base rate, not executed deal pricing, and they skew to larger fund-level facilities.

So a grid might read 550 over at or below 15% LTV, 600 over above 15% and up to 25%, and 650 over above 25%. The documents will say when a change takes effect, which is often on delivery of a compliance certificate or on a new drawing rather than automatically on the valuation date.

Why lenders price this way

The lender's risk is not fixed. Two things change it. The first is drawings. A delayed-draw facility that starts at 10% LTV and is drawn to 30% has tripled the lender's exposure to the same pool. The second is marks. Private asset values move, and the lender cannot sell the collateral to rebalance a performing loan.

A grid lets the lender charge for the risk actually taken and gives the borrower a reason to keep LTV low. It usually sits alongside two other negotiated thresholds. Above an intermediate LTV a cash sweep diverts some proportion of distributions to repay the loan, often a partial sweep rather than all of them. Above the covenant ceiling the borrower is in breach, which in most documents starts a cure period to prepay or add collateral rather than an immediate default (Travers Smith, NAV facilities to credit funds). The pricing step, the sweep trigger and the ceiling are three separate numbers. Ask for all three.

What counts as NAV in the grid

The grid is only as good as the denominator. Take a $100m portfolio where one position is $30m. With a 15% concentration cap, that position counts for $15m and eligible NAV is $85m. A $15m loan is 15% of gross NAV but 17.6% of eligible NAV, and it is the second number that drives the grid.

Beyond concentration, lenders apply haircuts or exclusions to assets they are less comfortable with, such as early-stage venture or positions marked below cost. Assets whose documents restrict a pledge are not always excluded outright. Sometimes the lender takes security over the cash flows only and counts the position at a reduced value. On that point, Delaware's partnership statute lets a partner grant a security interest without ceasing to be a partner, unless the LPA provides otherwise, but it also disapplies UCC §§9-406 and 9-408 for partnership interests, so an anti-pledge clause in the LPA is effective (6 Del. C. §17-702; 6 Del. C. §17-1101(g)). Whether that means consent, a haircut or exclusion depends on the wording.

Valuation timing matters too. Quarterly statements arrive with a lag, and some lenders reserve the right to call for a revaluation between test dates on a material event. Ask whether yours does.

What LPs and regulators see

For fund-level borrowers, the grid is something LPs now expect to be told about. ILPA's July 2024 guidance, which is non-binding and aimed at private equity fund-level facilities, recommends disclosing to all LPs the rationale and key terms, including the rate, base and spread, initial LTV, size, repayment terms, collateral and covenants. It recommends LPAC consent where the LPA does not expressly permit the facility, and separately where proceeds fund distributions, whatever the LPA says (ILPA, NAV-Based Facilities Guidance, July 2024). For managers under AIFMD or the UK equivalent, the leverage calculations under Articles 6 to 8 of Delegated Regulation (EU) 231/2013 capture drawn exposure, and available undrawn financing is reportable in the Annex IV return (Regulation (EU) 231/2013). Family office and holding company borrowers are outside both.

What to check before signing

Read the bands, not the headline. The first band is the marketing rate, and the question is how quickly you reach the second and third. Check which side of each boundary a given LTV falls on. Check the definition of eligible NAV and the concentration cap. Check where the sweep starts and what proportion it takes. Check the cure mechanics at the ceiling. And check the undrawn fee, since a low drawn margin with a high commitment fee on a slowly drawn facility can cost more than a flat rate.

A grid is not a trick. It is the lender showing you how it thinks about risk over time. Conservative sizing reduces the chance of climbing it, but a markdown can move you up a band without any action on your part, and that is the scenario to model before you sign.