What is distribution financing?
Distribution financing is cash advanced today against a venture fund interest, repaid only from that interest’s future distributions until the provider earns a fixed return. After that, every distribution goes back to the investor. Nothing is sold: the LP keeps its interest, its vote and its upside, and there is no maturity, margin call or valuation covenant.
Updated October 29, 2026
Four steps
- The provider sizes an advance against one or more fund interests, usually a minority share of their NAV.
- The LP receives cash and keeps the interests. It stays LP of record and keeps funding its own capital calls.
- The GP pays the LP’s distributions on those interests into an account the provider controls. The provider takes an agreed share until it has received a fixed return, set as the greater of an IRR or a multiple of the advance.
- Then the provider’s claim ends. Every later dollar, and all the upside, goes to the LP.
Example: an LP with $30MM of NAV takes a $6MM advance. If its funds later distribute $40MM, the provider receives the first $9.1MM and the LP keeps $30.9MM, or $36.9MM in all with the advance. More on how it works.
Compared with the usual alternatives
| Sells anything? | Repaid from | Maturity | Upside after repayment | |
|---|---|---|---|---|
| Distribution financing | No | The interest’s distributions only | None | All of it, to the LP |
| Loan secured by the interest | No; the interest is pledged | The borrower, with recourse | Yes, with interest due | To the LP, after interest |
| NAV loan | No; the fund borrows | The fund’s portfolio | Yes, with LTV tests | Shared by all LPs, after interest |
| NAV preferred equity | Moves the portfolio into a new vehicle | Preferred distributions from the vehicle | Varies | Above the preferred return |
| Secondary sale | Yes, the interest | – | – | None on what’s sold |
Venture LP stakes sold for about 68–79% of NAV in the first half of 2026 (details). Distribution financing costs less than a sale whenever the interests return more than about 108% of today’s NAV in the example above.
LP-led or GP-led
- LP-led: an LP comes to a provider directly, against interests in one fund or several. The GP acknowledges the arrangement; no LP vote
- GP-led: a GP offers every LP the same terms. Each LP decides; those who stay out see no change, and the fund itself takes on nothing
- Fits best: mature venture funds with marked-up NAV, little cash returned so far, and holders who believe the marks
- Fits poorly: one company is most of the NAV, the marks are likely to fall, or the LP wants a clean exit
What to compare between offers
- Advance size as a share of NAV, and how each fund’s age, concentration and mark quality affect it
- The fixed return: the IRR and the minimum multiple, and which applies
- The share of each distribution that goes to the provider, and whether it steps down
- What happens to in-kind distributions of stock
- What ends the arrangement, and whether anything is owed if the fund winds up before the provider is repaid
Sources and related questions
Sources
- Jefferies, Global Secondary Market Review, July 2026
- Campbell Lutyens, 1H 2026 Secondary Market Report, August 2026
Related
- How can a venture LP get cash without selling its fund interest?
- Liquidity options compared
- Sale vs. financing calculator
Updated October 29, 2026. Yantacaw provides distribution financing; this page also covers options we don’t offer. General information, not legal, tax or investment advice.