An under-capitalized business may be one that cannot afford current operational expenses due to a lack of capital, which can trigger bankruptcy, may be one that is over-exposed to risk, or may be one that is financially sound but does not have the funds required to expand to meet market demand.
A business that is undercapitalized might face difficulties in covering its operational expenses due to insufficient capital, which can result in bankruptcy or financial instability; it could also be overexposed to risks or financially robust but short on resources for expansion.