The condition that exists when a company does not have enough cash to carry on its business and pay its creditors.

A situation in which a company does not have enough cash available to carry on its business.

Insufficient capital in a business to carry out its normal functions.

Undercapitalization refers to any situation where a business owner cannot acquire the funds they need. Usually, this refers to a business that cannot afford current operational expenses due to a lack of capital, which can trigger bankruptcy.