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Overadvance
Also called over-advance, over-formula advance.
Funding beyond what the borrowing base formula supports, extended as a temporary and usually discretionary accommodation with its own fee and repayment schedule.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
Asset-based facilities and factoring lines advance a percentage against eligible collateral. An overadvance funds above that line - collateral the borrower does not have yet, or availability the formula does not recognise.
It is granted for identifiable, short reasons: a seasonal inventory build ahead of a known selling period, a gap before a large receivable lands, a one-off order that requires materials before it produces an invoice. Documentation is either an overadvance sublimit written into the credit agreement with its own cap and amortization, or a side letter for a single occasion.
Repayment is normally scheduled - stepped down weekly or monthly out of collections - and carries a fee or a rate premium above the facility rate. Crucially, it is repaid out of the same collections that generate ordinary availability, so availability tightens twice while it amortizes.
Where this one catches people
An overadvance is almost always discretionary and revocable at the lender's option, even where the agreement describes a sublimit. A borrower who has come to rely on it is relying on a decision the lender re-makes each period, and lenders withdraw it in exactly the conditions that made it necessary.
Worked through
Illustration. Eligible receivables of $400,000 at an 80% advance rate give $320,000 of availability. The lender grants a $60,000 overadvance for a seasonal build, repayable at $10,000 a week over six weeks.
In week one the borrower draws $380,000. From week two, $10,000 a week of collections goes to the overadvance before restoring availability, so the borrower has both less headroom and a fixed weekly claim on cash - at the point in the season when receipts have not yet arrived.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
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Overadvance — common questions
What does overadvance mean?
Funding beyond what the borrowing base formula supports, extended as a temporary and usually discretionary accommodation with its own fee and repayment schedule.
Where does overadvance catch people out?
An overadvance is almost always discretionary and revocable at the lender's option, even where the agreement describes a sublimit. A borrower who has come to rely on it is relying on a decision the lender re-makes each period, and lenders withdraw it in exactly the conditions that made it necessary.
Is overadvance the same as an interest rate?
Overadvance is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does overadvance apply to?
Business Line of Credit, Invoice Financing, Asset-Based Lending.
Is there a worked example of overadvance?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside overadvance?
Advance rate, Asset-based lending, Availability, Borrowing base, Material adverse change.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.