2 min read
Definition
Overtrading happens when a company takes on more business than its cash can fund — buying stock and paying staff to fulfil orders long before customers pay. Sales and profit look healthy, but the bank account runs dry. It is a growth problem, not a demand problem.
Why it matters
Overtrading is a classic reason profitable businesses fail, and a classic case for working-capital finance to bridge the gap. Watch it in your net cash flow. See affordability red flags.
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