Overadvance

AAA

DEFINITION of 'Overadvance'

A short-term commercial loan taken by a company in order to purchase more materials for its inventory in preparation for an expected period of increased sales. An overadvance is used to build inventory prior to a peak sales period. The loan amount taken out by the company temporarily exceeds its (borrower's) accounts receivables; the loans are generally commercial, and are usually short-term ranging from 30 days to one year.

INVESTOPEDIA EXPLAINS 'Overadvance'

For example, a company may expect increased sales of product ABC during the upcoming holiday season. The company does not have enough product to cover the expected demand for this period. In order to meet the anticipated demand, the company must purchase or manufacture additional products to increase the inventory, and can do so with an overadvance.

RELATED TERMS
  1. Long Tail

    In business, long tail is a phrase coined by Chris Anderson, ...
  2. Inventory

    The raw materials, work-in-process goods and completely finished ...
  3. Loan

    The act of giving money, property or other material goods to ...
  4. Net Receivables

    The total money owed to a company by its customers, minus the ...
  5. Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another ...
  6. Protected Cell Company (PCC)

    A corporate structure in which a single legal entity is comprised ...
Related Articles
  1. Entrepreneurship

    Small Business: Speed Up Receivables To Avoid A Cash Crunch

    Waiting for customers to pay can be a losing game. Look to factoring for quicker cash.
  2. Markets

    Cash Flow On Steroids: Why Companies Cheat

    Pressure to be the best can sometimes push corporations to cheat. Learn how they do it and how to spot it.
  3. Investing

    What happens if a company doesn't think it will collect on some of its receivables?

    The accounts receivable account, or receivables for short, is created when a company extends credit to a customer based on a sale. However, there are times when a company will not collect on ...
  4. Delivery duty paid (DDP) is a shipping term.
    Investing

    What does DDP Mean?

    Delivery duty paid (DDP) is a shipping term specifying that the seller is responsible for all costs associated with delivery of the goods to the buyer. It is usually used when goods are exported ...
  5. Investing Basics

    Enterprise Resource Planning System: A How To

    An ERP system won’t transform poor management into good management, but the real-time business analytics can help make good management even better.
  6. Investing Basics

    How To Calculate Goodwill

    Goodwill is an intangible, but it is still possible to effectively calculate or estimate goodwill for a company.
  7. Investing Basics

    Using Appreciative Inquiry To Solve Management Problems

    In its purest form, appreciative inquiry is a powerful tool for shifting the focus of an organization to something much greater than its bottom line - although the eventual outcome will often ...
  8. Investing Basics

    The Basics Of Value Chain Analysis

    Value chain analysis establishes an action plan to understand and implement actvities that create values to a firm's clients, resulting in firm profits.
  9. Investing Basics

    Top Tools for ERP Enterprise Resource Planning

    Top tools used in Enterprise Resource Planning with its characteristics - Explaining the main tools companies use when using Enterprise Resource Planning appraoch
  10. Investing Basics

    Analysis of Companies with high goodwill

    High goodwill as a percentage of market cap can actually be a big red flag--it potentially means the company botched a major acquisition.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center