RSU Liquidity Advance
A non-recourse cash advance against the future settlement value of double-trigger RSUs you don't yet own.
- Underlying asset
- Unvested, unsettled double-trigger RSUs
- Advance basis
- Lien on future settlement proceeds (not shares)
- Board approval
- Explicit company board approval required
- Tax at settlement
- ~40% ordinary income withheld by company
- Advance sizing
- Calculated on net after-tax proceeds only
- Lender risk
- Total loss if company never exits or employee leaves
The double-trigger liquidity paradox
Employees holding double-trigger RSUs own zero actual shares while the company remains private. They hold a contractual promise. They cannot legally execute a direct secondary sale, initiate a VPFC, or participate in a standard tender offer because they possess no transferable property. RSU Liquidity Advances were developed by specialty credit funds specifically to bridge this gap. Rather than purchasing non-existent shares, the fund issues a non-recourse cash advance secured by a forward-looking lien against the future settlement value of the RSUs.
How the advance is sized and why it's smaller than it looks
Because the employee is pledging future corporate proceeds rather than currently owned property, the transaction requires explicit, bespoke approval from the issuing company's board of directors. The advance is sized against the estimated net after-tax settlement proceeds, not the gross RSU value. At IPO, the ordinary income tax on RSU settlement can consume approximately 40% of the gross value. The lender must account for this: a $1M gross RSU value might yield only ~$600K after ordinary income withholding, and the advance is sized against that net figure. This severely limits the total cash an employee can pull forward relative to the headline value of the RSU grant.
What happens at settlement and the lender's extreme risk
If the company successfully IPOs or is acquired, the RSUs settle into actual shares, the ordinary income tax is assessed and automatically withheld by the company, and the remaining net cash or shares are routed directly to the lender to clear the advance principal and accumulated fees. The lender's risk profile is extreme: if the company never achieves a liquidity event, or if the employee quits or is terminated before the event (failing the 'must be present to win' double-trigger requirement), the RSUs expire worthless. The non-recourse nature means the lender absorbs the total loss. This risk is why RSU Liquidity Advances are generally only available at late-stage companies with near-term exit visibility.
Common questions
Why do I need board approval for an RSU Liquidity Advance?
Because you're pledging future corporate proceeds rather than currently owned property, the transaction creates a lien on assets that technically flow through the company's equity settlement process. The company's board must approve this arrangement. It can be a significant administrative hurdle and some companies are reluctant to approve it.
How much can I actually borrow against my RSUs?
Significantly less than the headline value of your grant. If your RSUs are valued at $1M based on the current 409A, expect roughly 40% to be withheld for ordinary income tax at settlement. The advance is then sized against the remaining ~$600K, and the lender will advance a fraction of that (accounting for their fees and the risk of the company not exiting). Real advance amounts are often 30–50% of the gross RSU value.
What if I leave the company before the IPO?
This is the 'must be present to win' problem with double-trigger RSUs. If you leave before the liquidity event, your unvested RSUs typically expire. The second trigger is never met. This means the lender's collateral (the future settlement value) disappears. The advance is non-recourse, so the lender absorbs the loss, but you also lose any remaining vesting and any chance of RSU settlement value. The lender will factor employment stability and cliff dates heavily into their underwriting.
Providers for this path
These providers operate in the RSU Liquidity Advance space. StrikeRates does not endorse or recommend any provider. Review each independently.
Sources
This content is for educational purposes only and does not constitute tax, legal, or investment advice. Tax laws and regulations change frequently. Consult a qualified tax professional or attorney before making decisions about your equity compensation.
Use the scenario modeler to see how RSU Liquidity Advance mechanics play out with your specific grant. The full app goes deeper: per-grant modeling, fund signals, and competing lender terms matched to your situation.