Liquidity Path

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Liquidity Path

The plan by which the owner or founder of a company increases his/her liquidity. One may take out a line of credit against the value of the company, but the most common liquidity paths are either to sell the company in a merger or acquisition, or to make an IPO. The liquidity path may be the way the founder cashes out and relinquishes ownership of the company, or it may be the way by which he/she reinvests to expand the company. Without a liquidity path, the owner or founder may have a difficult time tapping into the value of the company he/she has built. See also: Sweat equity.