Carried interest can be difficult to leverage through traditional banks despite its substantial value. This case study shows how a £4.5M facility was structured at 33% LTV against £13.5M in fund carry through a specialist lender better equipped to underwrite private equity interests.

A senior private equity executive came to us last month with £13.5m in fund carry and one loan quote: his existing bank. The terms were poor. The process was slow. And despite holding his current account, savings, and probably his mortgage, they treated the conversation like he’d walked in off the street.

This happens more often than you’d think. When you hold illiquid assets, particularly carried interest, your relationship bank should, in theory, be the easiest route to liquidity. In practice, they’re often the most difficult. We secured him £4.5m at 33 per cent LTV with a five-year term through a specialist lender in a fraction of the time. His bank couldn’t get close.

Relationship banking doesn’t work for carry

Banks like simple. A diversified portfolio of listed equities, held in custody, with daily pricing and deep liquidity. That’s easy to value, easy to monitor, easy to lend against. Carried interest is none of those things. It’s a contractual entitlement to a share of profits from a fund’s investments, typically subject to hurdle rates, clawback provisions, and distribution schedules you can’t control. Even when the underlying fund is performing well, the path to cash is unclear.

Most high street and private banks will either decline outright or apply conservative assumptions that make the loan pointless. I’ve seen major institutions offer 15 to 20 per cent LTV on positions worth tens of millions, with pricing that reflects their discomfort rather than the actual risk. The fact you’ve banked with them for 20 years makes little difference. Their credit appetite is set by central policy, not your relationship manager’s opinion of your character.

Specialists exist for a reason

The lender we used in this case doesn’t care whether they’ve met the client before. They care about three things: the quality of the underlying fund, the legal structure of the carry, and whether the investment thesis still holds. They’ll want to see the fund documentation, understand the GP’s track record, and model out realistic distributions. But they won’t penalise you for being a new client, and they won’t waste time asking for five years of tax returns when the security is the carry itself.

This is where good broking matters. We knew within 48 hours which lenders would consider this seriously and which wouldn’t touch it. We knew the likely terms before we submitted anything. And we knew how to present the position so the credit team could move quickly. The client didn’t need to educate a lender on what carry is or explain why private equity is an asset class. That groundwork was already done.

Don’t confuse access with expertise

One mistake I see regularly: borrowers assume that because their bank offers securities-backed lending, it must be competitive across all asset types. It isn’t. A bank that happily lends 60 per cent against a portfolio of FTSE 100 stocks will baulk at 25 per cent against unlisted shares or fund interests. The products may sit under the same department, but their credit appetites are completely different.

The second mistake is waiting until you need the money. Lending against illiquid assets takes longer than lending against listed securities because due diligence is deeper. If you’re six weeks from exchange on a property and are only just approaching lenders, you’ve left it too late. This deal moved quickly because the client came to us early, the fund documentation was accessible, and we already knew the right lender. Strip any one of those out, and the timeline doubles.

What this means now

If you hold carry, co-invest stakes, or other private equity positions, don’t assume your current bank is your best or only option. In most cases, they’re neither. Specialist lenders will move faster, lend more, and price more accurately because they understand what they’re lending against. You’re not asking them to make an exception. You’re asking them to do what they do every week.

And if you’re an adviser or intermediary with clients in this position, stop referring them to their relationship bank by default. It feels like the safe recommendation, but it isn’t. It’s the slowest, most expensive, and least likely to actually deliver.

Read the full case study here: https://www.ennessglobal.com/insights/case-studies/gbp45m-lending-against-carried-interest-gbp135m-holdings