2 min read
What it means
Liquidity describes how quickly an asset becomes cash without losing value. Cash is perfectly liquid; money owed by customers is fairly liquid; stock and equipment are less so. Measures like the current ratio and quick ratio put a number on it. A profitable firm with poor liquidity can still miss a payroll run — profit is an accounting result, liquidity is having cash when you need it.
Why it matters for your company
Late customer payments are the classic liquidity drain — the UK's late-payment culture means the cash you have earned can sit unpaid for weeks. Keep a buffer, forecast with a cash-flow forecast, and hold a revolving facility you can draw on for genuine short gaps rather than scrambling when one lands.
What it means for you
Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.
Frequently asked questions
Is liquidity the same as solvency?
No. Liquidity is short-term — can you pay this month's bills? Solvency is long-term — do your total assets exceed total liabilities? A firm can be solvent but temporarily illiquid, and that gap is where facilities help.
How much cash buffer should a business hold?
A common rule of thumb is three months of fixed costs, but the right figure depends on how lumpy your income is. Seasonal businesses need more; steady subscription income needs less.
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Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.