I watched a CEO lose his credit line because he shared too little and then the banker asked for financial statements being shocked by the reduced profits and high liabilities. And I watched another CEO lose his credit line because he shared too much of the wrong things with his banker.
Both made the same mistake: They didn’t understand what bankers actually need to know.
The first CEO hid a customer concentration problem. His largest customer—representing forty percent of revenue—was behind on payments. He thought he could fix it before the quarterly review. He couldn’t. When the banker discovered it during routine covenant checks, they pulled the line. Not because of the problem, but because of the surprise.
The second CEO called his banker every time something went sideways. A missed sales target. A key employee resignation. A product delay. His banker started viewing the company as high-risk, even though most of these issues were normal startup turbulence. The constant stream of bad news without context created panic instead of confidence.
[Email readers, continue here ] Here’s what fifty years of board work taught me about the banker relationship:
Your banker isn’t your therapist. They’re your risk partner. They need to understand your business well enough to assess whether you can pay them back. Nothing more, nothing less.
Share proactively:
– Material changes in your business model
– Large customer wins or losses (anything over 10% of revenue)
– Covenant violations or near-violations before they happen
– Major hiring or leadership changes
– Shifts in your market that affect projections
Don’t share:
– Every operational hiccup
– Internal drama that doesn’t affect the numbers
– Speculative concerns that haven’t materialized
– Competitive intelligence that’s not relevant to your loan
The test is simple: If this information would change how I assess the company’s ability to service debt, share it. If not, don’t.
But here’s the critical part: Always deliver bad news with a plan. Don’t just say “We lost our biggest customer.” Say “We lost our biggest customer, which represents 22% of revenue. Here’s our 90-day plan to replace that revenue, and here’s how it affects our cash position and covenant compliance.”
Bankers can handle problems. What they can’t handle is uncertainty about whether you’re in control.
I’ve seen companies maintain their credit lines through difficult periods because the CEO kept the banker informed with context. And I’ve seen profitable companies lose their lines because the CEO treated the banker like a mushroom—kept in the dark.
The relationship is professional, not personal. Respect their time. Give them what they need to do their job, which is to evaluate and manage risk.
Trust isn’t built by sharing everything. It’s built by sharing what matters, when it matters, with a plan for what you’re doing about it.
