Prepaid advance

A prepaid advance is a financing where an investor pays the company cash up front and is repaid mainly in newly issued shares, usually priced at a discount to recent trading.

Last verified Oct 7, 2026

How it works

Under a prepaid advance agreement, an investor advances a lump sum, often at a small original issue discount (for example, paying $4,750,000 for a $5,000,000 advance). The company then repays the balance by issuing shares to the investor over time. The share price for each repayment is usually the lower of a fixed price and a percentage of a recent VWAP over a short window, with a floor price in some agreements.

Prepaid advances are often paired with an equity line from the same investor: the company can repay the advance with shares from the line, or draw new advances later. The investor's resale of the shares is typically registered on an S-1 resale.

Why it matters

Economically, a prepaid advance behaves much like a convertible note with variable-price conversion. The company gets cash immediately, but the number of shares it ultimately issues depends on the share price during repayment. Agreements often require cash payments, sometimes with a premium, if the price stays below the floor for a period, and may include monthly repayment obligations.

Worked example

Hypothetical: Company X receives $4,750,000 for a $5,000,000 advance. Repayment shares are priced at the lower of $3.00 or 94% of the lowest daily VWAP over the prior three days.

Lowest VWAP	Repayment price	Shares to repay $5,000,000
$3.50	$3.00	1,666,667
$2.00	$1.88	2,659,575
$1.00	$0.94	5,319,149

All figures are hypothetical.

How to spot it

Look for an 8-K under Item 1.01 describing a "Pre-Paid Advance Agreement" or "PPA", with the agreement as an exhibit, and a later S-1 registering shares for resale by the investor. See Prepaid advances.

Guides that use this term

Prepaid Advance Agreements: How They Become SharesHow a prepaid advance agreement works: cash up front repaid in discounted shares, and how the discount, lookback, floor and triggers set the share count.

Check any ticker for dilution

DilutionScan reads each covered company's SEC filings and lists its warrants, convertibles, ATM programs, shelves and S-1s on one page, with a dilution rating and cash runway.

Open the dilution screener Browse covered tickers

Definition from the Signal8 Academy glossary. Educational content only. DilutionScan and Signal8 are not broker-dealers or investment advisers, and nothing here is a recommendation to buy or sell any security.