Grill Me

Get your pitch grilled before the bank does

Situation: On Thursday Sam asks the bank for a bigger credit line, to carry a new deal with his biggest customer. He wants the hard questions first.

Example conversation with a made-up company.

Grill me on this. Thursday I'm asking the bank to raise our credit line by half. … My pitch: we've grown about 12% a year for three years, our biggest customer, a six-branch supermarket chain, just moved to 45-day payment terms in exchange for buying 10% more each month, so we need more working capital to carry the extra stock and the longer wait for cash. We've never missed a payment on the current line.

TigerTiger › think

Loaded skill: Grill Me

Question 1: where does "half" come from?

Everything in your pitch hangs on the size of the ask, and "raise our line by half" sounds like a round number, not a calculated one. The first thing the credit officer will ask is "half of what, and why that much?" You need to answer that without hesitating.
…
My recommendation: work that number out before Thursday and walk in with it. …

So what's the current line, and what does the extra cash for the supermarket deal work out to on your numbers?

Current line is 1 million. … So the deal itself needs roughly 100k. Honestly, the 'half' was also because I might open a third warehouse next year and I wanted some room.

Your math holds up. 15 days on 150k is 75k, and about 25k for the extra stock and its wait is reasonable. So the deal needs about 100k, against the 500k you're asking for. That gap is the real issue.

Question 2: what do you tell the bank about the other 400k?
…
My recommendation: option 3, split into two asks.

Now: raise the line modestly for the supermarket deal. Ask for about 150k, which is the 100k need plus a cushion, and show your calculation.
…
Would you walk in with that split, or do you have a reason to keep the full 500k on the table now?

Yeah, I'll do the split. 150k now, warehouse later. One thing though. The 12% growth is the three years before this one. The last twelve months were basically flat, even though we added three trucks. I was hoping they wouldn't dig into that.

…
Question 6: how did you pay for the three trucks?

My guess is some or all of it came out of the line, which would explain the high average draw and the flat year (cash tied up in vehicles, not stock or sales). …
How were the trucks paid for, and roughly how much of the 700k average is sitting there because of them?

Two of the three trucks came off the line, about 180k. The third is on a vehicle loan. So yes, a chunk of that 700k is trucks.

That changes the picture, and mostly for the better. If about 180k of the 700k average is trucks, your real working capital draw is closer to 520k, and about 720k at the December peak. … On those numbers you wouldn't need a raise at all. The pressure on the line comes from the trucks, not from growth. …

… OK, I think I've got it. What do I actually say on Thursday?

…
Still open: you don't yet know the real cause of the flat year. Say that plainly if asked. A credit officer will trust "we haven't pinned it down, here's what we've found and what we're changing" more than a neat story.

Last point on tone. … You've done the sums, so you're entitled to sound sure.

What changed: Sam goes in asking for less, sized to that deal, with a straight answer ready on the two trucks he paid for out of the credit line and an honest line about last year's flat sales.

Try it: Sam typed "Grill me on this." (skill: grill-me)

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