Liquidity Risk Exposure measures the borrower’s vulnerability to not having enough cash at the right time. In MSME lending, liquidity risk may come from delayed customer payments, slow-moving inventory, high working-capital utilisation, sudden supplier demands, tax payments, or bunching of EMIs. For example, a business with large receivables from one customer may face stress if that customer delays payment by even thirty days. This exposure matters because many defaults begin as timing problems before becoming permanent loss. The lender should review cash-flow cycles, bank statement balances, unused limits, debtor ageing, and repayment schedule. The common caution is to avoid assuming that profit equals liquidity; profitable businesses can still default due to cash-flow timing gaps.