DEFINITION of 'Advance Commitment'

A promise or agreement to take some future action. For example, a promise by a buyer to purchase goods at a price set beforehand is an advance commitment.

BREAKING DOWN 'Advance Commitment'

In financial markets, parties may make an advance commitment to sell an asset before they own it; the seller often buys a futures contract to offset the risk of a price increase at the time of purchase. In banking, a financial institution will make an advance commitment to a borrower to lend funds on a specified date on agreed-upon terms.

Note that in mortgage banking an advance commitment is called a "standby commitment."

RELATED TERMS
  1. Capital Commitment

    Capital commitment is future capital expenditures that a company ...
  2. Committed Capital

    Committed capital is a contractual agreement that obligates an ...
  3. Advanced Economies

    Advanced economies, as described by the International Monetary ...
  4. Future Advance

    A future advance is a clause in a mortgage which provides for ...
  5. Cash Advance

    A cash advance is a credit card issuers and banks allow clients ...
  6. Underwriting Agreement

    An underwriting agreement is a contract between a group of investment ...
Related Articles
  1. Personal Finance

    8 Quick-Cash Alternatives To Credit Card Advances

    Sometimes you can find a better deal than a cash advance – but some alternatives are even more pricey. Learn where to find the cheapest source of quick cash.
  2. Investing

    The Ins And Outs of Seller-Financed Real Estate Deals

    There's more than one way to buy or sell a house. Seller financing presents yet another unique option.
  3. Trading

    Stock Futures vs. Stock Options

    A quick overview of how stock futures and stock options work and why you would pick one over the other depending on the strategy being used.
  4. Investing

    The Pros and Cons of Owner Financing

    Details on the upside and risks of this type of deal for both the owner and the buyer.
  5. Investing

    Home Sale Contingencies: What Buyers And Sellers Need to Know

    Home sale contingencies protect buyers who want to sell one home before purchasing another. Find out what buyers and sellers need to know about these contractual conditions.
  6. Investing

    Contingency Clauses In Home Purchase Contracts

    Here, we introduce widely used contingency clauses in home purchase contracts and how they can benefit both Buyers and Sellers.
RELATED FAQS
  1. What kinds of derivatives are types of forward commitments?

    Learn more about what a derivative is, what a forward commitment is and which types of derivative securities have forward ... Read Answer >>
  2. What is the difference between CIF and FOB?

    Learn about the differences between FOB and CIF international trade agreements and the advantages and disadvantages for sellers ... Read Answer >>
  3. What is the difference between share purchase rights and options?

    Discover the difference between share purchase rights and options, which are essential to understand when deciding to invest ... Read Answer >>
  4. What are the Differences Between Ex Works (EXW) and Free On Board (FOB)?

    Ex Works describes the situation where the seller is responsible for having her goods ready at her place of business. Free ... Read Answer >>
Hot Definitions
  1. Return On Equity - ROE

    The profitability returned in direct relation to shareholders' investments is called the return on equity.
  2. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  3. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  4. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  5. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  6. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
Trading Center