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Undercapitalization

Undercapitalization happens when a business doesn't have the necessary capital to continue running the business normally and they aren't able to bring in more money or get any loans. Not being able to buy supplies, pay vehicle payments, cover employee payroll, etc are all signs of undercapitalization. New businesses can often find themselves going through undercapitalization because they tend to underestimate the cost of starting and running a new business.