NAV Lending vs. Warehouse Facility
Borrowing against the value of a seasoned book versus revolving capacity that bridges a pipeline toward permanent capital.
NAV lending suits a litigation finance fund or law firm with an established book of settled-but-unpaid judgments or late-stage positions whose value is largely de-risked, and that wants liquidity against that value without selling positions or waiting for actual payment. It fits funds far enough along in their lifecycle to have accumulated a meaningful base of seasoned, near-resolved matters, typically after several years of consistent origination and resolution activity.
A warehouse facility suits a fund or originator earlier in its trajectory, one still accumulating a case pipeline ahead of a planned securitization, fund closing, or other permanent capital event, and that needs revolving capacity to bridge origination volume in the meantime rather than a facility sized to already-resolved value. It is often the first institutional-scale facility a growing originator secures.
The lender values the fund's net asset value — the estimated worth of settled judgments and late-stage cases net of existing liabilities — and extends a facility sized to a conservative percentage of that NAV, secured against the underlying positions and revalued periodically as those positions move toward actual payment. The facility does not depend on any future capital event to be repaid; it is serviced from the value already embedded in the book. Valuation typically follows a defined methodology agreed at closing, so both parties share a consistent basis for periodic revaluation as positions mature.
The facility provides revolving credit secured against an accumulating case pipeline, allowing draws as new matters are underwritten and repayment or refinancing as those matters are later sold into permanent capital or resolve, with the borrowing base recalculated as the pipeline's composition changes. Unlike NAV lending, the collateral is a mix of maturities, including cases with substantial resolution uncertainty still ahead of them. Draw requests are typically reviewed against eligibility criteria the originator and lender negotiate at the outset.
Because NAV lending is secured against positions that are largely resolved or highly advanced, pricing is comparatively favorable relative to earlier-stage structures, reflecting the lender's reduced exposure to merits-based litigation risk and its closer resemblance to conventional asset-based lending than to litigation risk underwriting.
Because a warehouse facility is secured against an accumulating pipeline that has not yet reached the take-out event, pricing reflects both the credit profile of the originator and the quality of the pledged pipeline, and typically carries a wider spread than NAV lending precisely because more of the underlying value remains contingent on future resolution or a successful refinancing.
Risk is concentrated in valuation accuracy — if the estimated NAV proves too optimistic or payment is delayed, the advance-rate cushion absorbs some of that gap, but overvaluation, not merits-based litigation risk, is the central exposure the lender manages. Independent valuation review at closing, and at each revaluation date, is the primary tool lenders use to guard against this risk.
Risk is concentrated in the timing of the anticipated take-out event. If the planned securitization or fund closing is delayed or does not materialize on the expected terms, the originator remains exposed on the warehoused pipeline for longer than planned, which is why warehouse facilities typically include extension provisions addressing exactly this scenario. A prolonged delay can also affect pricing if the facility must be renegotiated on less favorable terms.
NAV lending wins when a fund has a substantial book of resolved-but-unpaid value and wants to monetize that near-certain value without selling positions outright or disrupting relationships tied to those matters, typically the natural next step once a fund's book has matured.
A warehouse facility wins when an originator needs flexible, revolving capacity to bridge origination volume ahead of a defined future capital event, and does not yet have the seasoned, resolved book that NAV lending requires as collateral.
| Factor | NAV Lending | Warehouse Facility |
|---|---|---|
| Underlying collateral | Settled or late-stage, largely de-risked positions | An accumulating pipeline of newly originated cases |
| Repayment path | Serviced from value already embedded in the book | Repaid or refinanced at a future take-out event |
| Dependence on a future capital event | None — the facility stands on its own collateral | High — sized around an anticipated securitization or closing |
| Typical borrower stage | Established funds or firms with a mature book | Funds or originators still building toward scale |
| Pricing tendency | More favorable, reflecting lower remaining uncertainty | Wider spread, reflecting exposure to pipeline and timing risk |
| Extension provisions | Less central, since no take-out event is assumed | Common, addressing delay in the anticipated capital event |