Liability Mismatch Risk occurs when the timing or type of debt obligations does not align with the borrower’s cash-flow pattern. In MSME lending, a business may use short-term borrowing for long-term assets, take bullet repayments despite uneven income, or carry high current liabilities against slow-moving receivables. For example, financing machinery through a short-tenor loan can create repayment pressure before the machine starts generating enough cash. This risk matters because mismatch can cause liquidity stress even if the business is profitable on paper. The underwriter should compare loan tenure, repayment frequency, working-capital cycle, receivable days, and asset life. The common caution is to structure facilities according to cash generation rather than only borrower preference.