business-line-of-credit

Business line of credit: buy a summer hat in winter

Bill Ackman paid for protection when nobody wanted it. The small-business version is borrowing arranged in a good month, and one count you run every month.

By Samer Azar, Fractional CFO · 2026-10-07 · 6 min read

Key Takeaway: Arrange the bank's money in a good month and leave it untouched. Then count your days of cash every month: cash in the bank, divided by one month of outgoings, times 30. Under 13 days, the next bad month gets to decide for you.

Dear reader,

In February 2020, Bill Ackman bought a summer hat in winter. He paid $27 million in premiums and commissions for insurance against a credit crash, at a time nobody wanted it, and got $2.6 billion back four weeks later.

He cashed it in on the 23rd of March. The week everyone else was forced to sell, he was buying, because nobody could force his hand.

His letter, two days after he got out.

You can't buy that protection once the storm is here. The small-business version costs far less, and it's the third page of the lender file I promised you.

Worth your time this week

• A finance chief who came up through product and hired the specialists. Good Morning, CFO on a finance chief who came up through product management and hired a chief accounting officer for the gap. Useful before you decide what your first finance hire has to be good at.

• The study behind the 27 days. The JPMorgan Chase Institute tracked the daily cash of small businesses and counted how many days each could keep paying if money stopped coming in. Half could last 27 days. Restaurants held 16, real estate firms 47.

• When money got tight, owners reached for their own pocket first. The Federal Reserve's 2026 report on small employers: of the firms that hit a money problem, 54% used personal funds and 36% took on debt. Only 45% of credit line applicants were fully approved.

98% of his money can't leave

In 1994, a young Bill Ackman asked Warren Buffett about debt at the Berkshire annual meeting. Buffett had written his rule down: "We never want to count on the kindness of strangers in order to meet tomorrow's obligations."

In 2015, two in every three dollars Ackman ran could walk out. After one bad bet they did, and his firm's assets fell from $20.2 billion to $6.8 billion.

He had already started the fix: when his fund listed in 2014, 34% of his capital was money that couldn't leave. Now it's 98%.

His fund wrote down why: with investors free to leave, "We would likely have been sellers rather than opportunistic buyers."

Protection is cheap before the storm

Ackman runs on three locks: money nobody can take back, debt nobody can call, and owners who can't force a sale. The second is the one you can arrange in a good month.

He paid for his crash protection weeks early, a small capped cost he compared to insuring your home more heavily when you can see a storm coming.

When it paid, he put $2.21 billion to work within three weeks. A year later it was worth $3.915 billion.

His borrowing has the same shape: "No margin leverage, no mark-to-market covenants."

Small firms mostly borrow the other way around. Three in four small-firm credit lines mature within a year, and between late 2008 and late 2009 the share of small employers holding one fell from 57% to 46%.

Your version: arrange the borrowing in a good month and leave it undrawn. Where you can, swap an overdraft the bank can pull for a fixed-term, fixed-rate loan.

Protection is cheap until the day you need it.

The rule of this issue

Count your days of cash

Cash in the bank, divided by one month of outgoings, times 30. That's how many days you'd last if revenue arrived late.

The typical small business holds 27 days of cash. A quarter of them hold fewer than 13.

Under 13 means the next bad month gets to decide for you.

Work yours out now and reply with your band: under 13, 13 to 30, or more than 30.

Page three of the lender file

Page one sorted your revenue into four columns. Page two was the direction of your revenue per person. Page three is this count, plus the borrowing you have and when it ends.

In the lender meetings we sit in, the bank reads cash and working capital before it reads your plan. Walk in with the count, what the money is for, and what you'll do if a month goes wrong.

Ask in a good month, because the same file reads differently when the count is falling.

If you'd rather have this done for you, apply for a strategy session and we'll work out which lock your business signs first.

The fastest lock costs nothing: customers pay you before you pay suppliers. I showed you how a retailer does exactly that.

The 7 ingredients of an AI workflow

Files from building the AI CFO. The seven things a monthly close needs before AI can run it, and the one that compounds.

I kept failing with my team at AI until we landed on this process. Here's the recipe we are building to, seven ingredients to score your own close against.

1. Connected data, checked for gaps first.

2. No number without data behind it.

3. A written playbook of how the business works: the AI reads it, only a person changes it.

4. The same steps every month, started by a person, dry run first.

5. Exceptions land in a to-do list, each with a proposed fix.

6. A report a person reviews and signs, with one signed version.

7. Comments feed back into the playbook as changes a person accepts.

The AI reads your data, your playbook and last month's comments, and everything it produces lands as a draft or a to-do.

Number 7 made it work: every fixed mistake becomes a rule in the playbook. What compounds is the mistakes you fix.

That's the moat. No AI model is going to tell you what your business should and shouldn't do on the specifics. A person starts the run, accepts every playbook change and signs the report.

Ingredient 5 on a demo company.

Steal it:

• Inputs: list what your close reads and mark any gap.

• The test: one point per ingredient, counted only if it's written down.

• The human: name who starts the run, changes the playbook and signs.

Every company should have a strategy to develop and document its own rules. Last month's fixed mistakes are where they start.

If you run a finance team, forward this to whoever owns your month-end.

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