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Let them know that unfortunately, the business has been experiencing some major financial issues lately, and it's important that you let everyone know so you can come up with solutions together.
You could say that you've had some unexpected costs arise as well as a decrease in revenue which have put you in this tough spot. It's not ideal but I'm confident that if you all work hard together, you can come up with creative solutions to help get us through these rough times.
I think it's important that you let them know about what's happening and the extent of the problem. You don't want them to stick with you if their jobs aren't secured.
As the leader of the team, I think it's nice you want to be open and honest about what's going on so that everyone is aware of the situation.
Above all continue to communicate openly and often as we navigate this difficult period, they will understand and I'm sure some of them will get in the trenches with you.