Line of Credit for Funds

Meow Advisory, LLC

Meow Advisory, LLC

A fund line of credit is a type of revolving credit facility that provides flexible access to capital for funds such as private equity funds or venture capital funds. It works similarly to a credit card in that the lender provides a credit limit, and the borrower can withdraw up to that limit, repay it, and withdraw again as needed.

Fund lines of credit offer several potential benefits compared to alternatives like calling capital from limited partners or using fund cash reserves.

When Should You Consider a Fund Line of Credit

There are a few situations where securing a fund line of credit could be advantageous:

Smoothing Cash Flow Gaps

A line of credit allows fund managers to bridge timing gaps and maintain investment pacing, rather than missing out on deals because of delays in drawing down committed capital from LPs. This flexibility is especially useful for younger funds without large cash reserves.

Rapid Execution of Time-Sensitive Deals

The ability to tap lines of credit quickly means fund managers can act fast when necessary, like for competitive auctions or co-investment alongside a desirable lead investor. Avoiding lengthy capital call notices improves responsiveness.

Avoiding Idle Committed Capital

Maintaining uninvested reserves ties up capital that could be working harder elsewhere. Credit lines let funds limit cash drag by calling committed capital only when deals are signed rather than accumulating potentially unnecessary reserves.

Pros and Cons of Using a Fund Line of Credit

While lines of credit offer liquidity and flexibility, they also come with risks and downsides to weigh:

Pros:

  • Flexible Access to Capital – Withdraw and repay revolving credit as needed for deals and expenses, within set limits. Avoid tying up excessive reserves.
  • Typically Lower Rates Than Credit Cards – Fund lines tend to have lower interest rates compared to alternatives like credit cards.
  • Only Pay Interest on What You Borrow – You only pay interest on withdrawn amounts, not the entire credit limit. This helps limit unnecessary funding costs.

Cons:

  • Expensive Fees Can Add Up – Origination, draw, and maintenance fees apply on top of interest charges, increasing total costs.
  • Risk of Overborrowing – Easy access to credit could lead some managers to overextend. Strict discipline is required.
  • Strict Eligibility Requirements – Lenders have stringent requirements around fund track record, assets under management, credit scores, and more. Access isn't guaranteed.

Eligibility and Requirements

Because lines of credit carry meaningful risk, lenders impose thorough requirements:

  • Time in Business – Typically at least 12-24 months of fund management operations required. Ensures manager stability.
  • Assets Under Management – Generally require minimum fund size like $100 million+ to demonstrate sufficient scale and cash flows.
  • Credit Score – Personal credit scores of 650+ and scrutiny of manager financial health protects against default risk.
  • Collateral – Many lenders demand collateral to secure lines in case of nonpayment. Fund investments, management company value, or sponsor guarantees often used.

Comparing Business Line of Credit Options

When assessing options, weigh these key variables:

  • Interest Rates – Compare both nominal and effective rates across options after incorporating fees.
  • Fees – Account for one-time and recurring fees in total cost calculations. Fees can stack up incrementally.
  • Loan Amounts – Ensure credit limits adequately cover projected fundraising pacing gaps without excessive unused capacity dragging returns.
  • Eligibility Criteria – Analyze lender requirements around track record length, assets under management, credit scores and determine if you meet thresholds.

Applying for a Business Line of Credit

To secure a fund line of credit:

  • Decide on Loan Amount – Estimate typical quarterly capital calls and size line of credit to cover delays or gaps. Build in cushion.
  • Gather Required Documents – Have fund financials, LP commitment letters, founder financial statements ready.
  • Evaluate Lenders – Compare rates, fees, terms, eligibility criteria and customer service. Prioritize fit.
  • Submit Application – Be responsive to lender information requests. Provide collateral if required.

Conclusion and Key Takeaways

In closing, fund lines of credit allow managers to optimize pacing and avoid missing investment opportunities. But improper use risks unnecessary costs and overleveraging. Main takeaways:

  • Lines Provide Flexible Capital Access – Withdraw and repay on revolving basis up to limit
  • Interest Savings Versus Alternatives – Lower nominal rates than options like credit cards
  • Discipline Critical to Manage Risks – Over-borrowing and fee drag can destroy returns
  • Lender Requirements Strict – Lengthy track record, assets under management and credit checks typical
  • Compare All Options for Best Terms – Significant variability across providers on rates, fees, eligibility and loan amounts

Brokerage services are provided by Atomic Brokerage, LLC ("Atomic Brokerage"), a registered broker-dealer and member of FINRA and SIPC. Neither Meow Advisory LLC nor Atomic Brokerage are a bank. Investments in securities are Not FDIC insured, Not Bank Guaranteed, and May Lose Value. Investing involves risk, including the possible loss of principal. Before investing, consider your investment objectives and the fees and expenses charged. For more details about Atomic Brokerage, please see the Form CRS, General Disclosures, and the Privacy Policy. Check the background of Atomic Brokerage on FINRA’s BrokerCheck. Custodial and clearing services are provided to Atomic Brokerage by Pershing LLC. Technology services may be provided by AtomicVest.

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For accounts opened through Atomic Brokerage LLC: Meow Advisory LLC has an engagement with Atomic Brokerage LLC (“Atomic Brokerage”), a registered broker-dealer and member of FINRA and SIPC , to bring you the opportunity to open a brokerage account. Brokerage services for customers of Meow Advisory LLC are provided by Atomic Brokerage. For more details about Atomic Brokerage, please see the Form CRS, General Disclosures, and the Privacy Policy. Check the background of Atomic Brokerage on FINRA’s BrokerCheck.
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Neither Atomic Invest nor Atomic Brokerage, nor any of their affiliates, is a bank. Investments in securities are Not FDIC insured, Not Bank Guaranteed, and May Lose Value. Investing involves risk, including the possible loss of principal. Before investing, consider your investment objectives and the fees and expenses charged by Atomic Brokerage and/or Atomic Invest.
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Meow currently partners with three banking providers. Banking services are provided by Third Coast Bank SSB; Member FDIC, Grasshopper Bank, N.A; Member FDIC, and FirstBank, a Tennessee corporation; Member FDIC.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by Grasshopper Bank, N.A, you deposit your funds into a deposit account at Grasshopper Bank, N.A. which sweeps those funds into deposit accounts across a network of Federal Deposit Insurance Corporation (“FDIC”)-insured banks, for up to the current standard maximum deposit insurance amount (“SMDIA”) of $250,000 per eligible depositor, per destination institution, for each ownership capacity or category, subject to applicable terms and conditions, including Grasshopper's ICS Deposit Placement Agreement. Grasshopper Bank, N.A. uses a third-party vendor and agent to help administer this sweep process. Visit https://www.intrafi.com/network-banks/ for a list of the banks and savings associations with which we/Grasshopper, N.A. have a business relationship for the placement of deposits at destination institutions, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by Grasshopper, N.A. or you). The current maximum deposit insurance amount for your funds is up to $125 million in FDIC insurance through the sweep network of Grasshopper Bank, N.A, subject to change at any time with notice from Meow and/or pursuant to applicable law. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the applicable rate sheet. See applicable terms and restrictions and refer to the applicable rate sheets for additional information.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by Third Coast Bank SSB, you deposit your funds into a deposit account at Third Coast Bank SSB. If you also hold funds in a sweep program with Third Coast Bank SSB, Third Coast Bank SSB sweeps those funds into deposit accounts across a network of FDIC-insured banks, for up to the current SMDIA of $250,000 per eligible depositor, per receiving bank, for each ownership capacity or category, including any other balances you may hold at that receiving bank directly or indirectly through other intermediaries, including broker-dealers. Third Coast Bank SSB uses a third-party vendor and agent to help administer this sweep process. Visit Third Coast Bank SSB for a list of the banks and savings associations with which we/Third Coast Bank SSB have a business relationship for the placement of deposits at receiving banks, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by Third Coast Bank or you). The current maximum deposit insurance amount for your funds is up to $50 Million in FDIC insurance through the sweep network of Third Coast Bank, subject to change at any time with notice from Meow and/or pursuant to applicable law. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the applicable rate sheet. See applicable terms and conditions and refer to the applicable rate sheet for additional information.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by FirstBank, a Tennessee corporation, you deposit your funds into a deposit account at FirstBank, which sweeps those funds into deposit accounts across a network of FDIC-insured banks, for up to the current SMDIA of $250,000 per eligible depositor, per destination institution, for each ownership capacity or category, subject to applicable terms and conditions, including FirstBank's ICS Deposit Placement Agreement. FirstBank uses a third-party vendor and agent to help administer this sweep process. Visit IntraFi for a list of the banks and savings associations with which FirstBank has a business relationship for the placement of deposits at destination institutions, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by FirstBank or you). The current maximum deposit insurance amount for your funds is up to $125 million in FDIC insurance through the sweep network of FirstBank, subject to change at any time with notice from Meow and/or pursuant to applicable law. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the applicable rate sheet. See applicable terms and restrictions and refer to the applicable rate sheet for additional information.

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FirstBank Funds Availability Notice

FirstBanks general policy is to allow you to withdraw funds deposited in your account on the first business day after the day we receive your deposit. Funds from electronic deposits will be available on the day we receive the deposit. In some cases, we may delay your ability to withdraw funds beyond the first business day. Then, the funds will generally be available by the SECOND business day after the day of deposit.