Recourse Invoice Discounting Borrowing Base Adjustments under Dispute
Disputed invoices trigger immediate borrowing base deductions, cross-ageing exclusions, and liquidity calls under recourse discounting facilities.
Over Advance Call
Meaning
Credit demands are issued by a lender when the amount of money borrowed exceeds the current limit allowed by the borrowing base. An over advance call requires the borrower to immediately repay the excess funds or provide new collateral to cover the difference. This situation often arises after an audit reveals that some previously accepted assets are now ineligible for financing.
Excess Funding
Borrowers sometimes receive more money than their assets support due to reporting errors or sudden price drops. When the bank identifies this imbalance, it issues an over advance call to protect its legal position. This notice is a formal document that sets a hard deadline for the return of the overpaid amount.
Repayment Trigger
Specific events such as a failed inventory count or a major customer bankruptcy can lead to an immediate reduction in the credit limit. The over advance call acts as a mechanism to bring the loan back into line with the actual value of the security. Management must act quickly to find the necessary cash to satisfy the demand.
Asset Liquidation
Failure to meet the terms of the request allows the lender to take control of the pledged assets and sell them. An over advance call is a serious warning that the credit facility is under stress and may be terminated. If the company cannot pay, the bank might seize the receivables or inventory to recover its principal.
This process is the final step before a formal default is declared on the entire loan.