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. Net Receivables

    The total money owed to a company by its customers, minus the ...
  3. Loan

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

    The raw materials, work-in-process goods and completely finished ...
  5. Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another ...
  6. Separation Of Powers

    An organizational structure in which responsibilities, authorities, ...
RELATED FAQS
  1. 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 ... Read Full Answer >>
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. Stock Analysis

    Is Prospect Capital Exposed To Elevated Losses?

    According to a federal government report, the quality of leveraged loans has begun to deteriorate. Prospect Capital specializes in these types of loans.
  4. Stock Analysis

    Why Investors Bailed On Halcon's Stocks

    The unexpected plunge in the oil price over the past few months sent Halcon Resources' stocks down nearly 75%.
  5. Economics

    America's Most Notorious Corporate Criminals

    Learn about the crimes and punishments of some of the most infamous convicted white-collar crooks.
  6. Investing

    Corporate Governance

    Corporate governance refers to the formally established guidelines that determine how a company is run. The company’s board of directors approves and periodically reviews the guidelines, which ...
  7. 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 ...
  8. 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.
  9. Investing Basics

    How To Calculate Goodwill

    Goodwill is an intangible, but it is still possible to effectively calculate or estimate goodwill for a company.
  10. 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 ...

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center