Introduction
Relationships Before Ratios: Why the Best CFOs Build Bank Trust in Peacetime
By Hindol Datta/ July 9, 2025
Building the Foundation of Trust
Over my three decades as an operational CFO, I have learned that relationship banking is not about leverage. It is about trust. A strong CFO-bank relationship creates credibility before the first financial covenant is signed or the first line of credit is drawn. When considering CFO best practices and asking, “What do CFOs consider to be their top priority?”, the answer often circles back to trust, reputation, and clarity. Reputational capital, built slowly and steadily, is often what determines whether a company survives turbulence. This is true not only for full-time finance leaders but also for those engaging fractional CFO and fractional CFO services, where credibility and relationship-building become the foundation of long-term success.
In my career, I have raised more than $75 million in lines of credit, collateralized loans, venture debt, and revolving credit facilities. I have also built relationships for bankers’ acceptances to support trade financing. These structures were made possible not because the ratios always looked perfect, but because the trust was there.
Younger CFOs and founders often ask me why lenders sometimes favor one company over another, even when the numbers look similar. The answer is discipline and rhythm. Banks price risk through cadence, character, collateral, clarity, and capability. Each is a building block of reputational equity, and none is negotiable.
Cadence is about rhythm. Lenders care about consistent reporting. When I set up finance functions, I make sure lenders receive timely financial packages and forecast updates alongside the board. Predictable updates, variance explanations, and regular check-ins eliminate surprises. Banks prefer steady, transparent communication over flashy presentations.
Character is revealed when things go wrong. In one case, we identified an error in a forecast that overstated our debt service coverage ratio. Disclosing that mistake to the lender cost us nothing but earned trust that later gave us room when we missed targets. Lenders remember integrity more than short-term ratios.
Collateral goes beyond accounts receivable and inventory. It includes the systems and processes that underpin the numbers. A disciplined collections process, an accurate working capital cycle, and clear collateral documentation are as necessary as the assets themselves. Lenders see cultural collateral as proof of operational maturity.
Clarity matters most when forecasts shift. At Lifestyle Solutions, a wholesale furniture distributor with global subsidiaries, we once had to pivot our supply chain strategy quickly. We did not wait for the bank to ask. We explained the change, outlined the risks, and provided new cash flow forecasts. That narrative gave them confidence, even in the face of uncertainty.
Finally, capability is what brings it all together. Lenders want to know that the finance team can execute. This is why I always invest in 13-week cash flow forecasting. At one company, we built a forecasting model so robust that the bank adopted it across multiple client relationships. Execution is the ultimate test of trust.
When these five elements align, reputational equity compounds. One company I supported missed revenue targets by 20 percent during a downturn, yet the bank extended terms rather than call covenants. The reason was not the numbers. It was the thirty-six months of discipline, communication, and trust that came before.
Operationalizing Trust Into Capital Strategy
Trust must eventually convert into strategic capital access. A CFO’s job is not only to raise debt financing but also to align the capital structure with business inflection points. This means building optionality planning for downturns, expansions, and liquidity needs well in advance of the crisis.
I see trust as a stabilizing node in a system. In systems thinking terms, it absorbs shocks and allows the enterprise to remain functional during volatility. This is why I embed trust into financial operations. Regular board updates double as lender updates. Variance analysis is documented, not hidden. Cash flow forecasts are refreshed continuously. Each cycle of reporting builds confidence.
Quarterly reviews with lenders, even if not required, are an essential part of my process. These meetings are not about compliance. They are about strategic alignment. We share leading indicators, competitive shifts, and hiring plans. By doing so, we make our lender part of our journey. That transforms the relationship from transactional to collaborative.
Documentation is also a signal of discipline. I include covenant schedules in internal reporting packs and ensure the finance team understands them. When we anticipate a breach, we are proactive. In one case, we worked with the bank to restructure terms ahead of time. That proactive step preserved liquidity and credibility.
Character is also tested in crisis. At BeyondID, when collections slowed during a period of rapid growth, I informed our bank immediately, provided updated models, and checked in regularly. That response preserved flexibility when we needed it most. Banks value transparency far more than temporary performance issues.
Capability is reinforced through systems and processes. Clean reconciliations, ERP integration, and timely closes demonstrate that finance teams can manage risk. I have seen banks extend favorable terms not just because of ratios, but because they trusted our internal controls and reporting quality.
Lending syndicates also watch reputation closely. A CFO who defaults on a covenant without disclosure can damage credibility across multiple institutions. I have always managed syndicated lines with the same transparency I apply to smaller bilateral facilities. This consistency builds reputational equity across the ecosystem.
In every role from restructuring capital stacks at EDG to negotiating venture debt facilities in Silicon Valley the same truth has held. Lenders follow patterns of trust. Ratios fluctuate. Sectors wobble. But disciplined communication, character, and clarity earn flexibility that no model can capture.
Ten critical questions CFOs should ask about banking relationships
- How do we ensure a consistent cadence of communication with lenders beyond required reporting?
- What steps are we taking to demonstrate character and transparency in both good times and bad?
- Do our collateral processes collections, inventory management, documentation signal operational maturity?
- How do we embed clarity in lender updates, including variance explanations and forward-looking scenarios?
- Is our finance team demonstrating capability through accurate forecasts and clean reporting systems?
- Do we have a capital structure strategy that balances equity financing, venture debt, and revolving credit facilities?
- How do we prepare lenders for strategic pivots, acquisitions, or market downturns before they happen?
- Are we using covenant compliance as a checklist or as a signaling mechanism of discipline?
- How strong are our relationships with relationship managers, and are they advocating for us inside their institutions?
What reputational equity have we built that will matter more than ratios during turbulence?
