Glossary · Reading the business
Liquidity
In short
The ease with which an asset can be converted into cash without affecting its market price. For a business, it refers to its ability to meet short-term obligations.
What it means in a deal
Lenders assess both the business's liquidity and your personal liquidity. The business needs enough cash and current assets to cover operating expenses, especially during a transition. Your personal liquidity demonstrates your ability to cover unexpected costs or personal expenses if the business underperforms initially. Be ready to provide bank and brokerage statements.
Related terms
Common questions about Liquidity
- How does a lender evaluate my personal liquidity for an SBA 7(a) loan?
- What if my personal liquidity is low, but the business's financials are very strong?
- How does a lender verify the liquidity of an equity injection from a borrower's investment account?
- What if my personal financial statement shows low liquidity, but I have a strong credit score and business plan?
- What happens if my personal financial statement shows low liquidity, but I have a strong credit score and business plan?
- What if my personal liquidity is low, but I have a substantial amount in my 401k that I can borrow against?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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