D&T, a Miami-based distributor of consumer electronics across Latin America, found itself in a precarious financial situation in early 2022. Despite its strong performance in previous years, particularly during the COVID-19 pandemic, when demand for electronics surged. The company faced significant challenges in the coming years. Eager to capitalize on their success, the company expanded into the gaming industry, launched its own line, and established subsidiaries in Latin America. However, this expansion coincided with a downturn in the technology market, leading to overstocked inventory and rapidly depreciating product values, which resulted in substantial losses.
Because of these financial difficulties, D&T failed to meet the financial covenants imposed by its bank, which ultimately led to the loss of its line of credit. The company was left at a critical crossroads, needing immediate liquidity to avoid further financial deterioration, potential layoffs, and even bankruptcy.
The Challenge
D&T 's sudden financial distress placed them in a precarious position. The company needed a financing solution that could provide the necessary cash flow while also allowing them to effectively manage their inventory and stabilize operations to avoid further financial decline.
Dave, CEO of D&T, elaborated on the challenges they faced post-pandemic. "We expanded rapidly, adding new products, launching our own brands, and establishing subsidiaries across Latin America. However, this growth stretched our resources thin, especially in managing inventory across multiple countries," Dave explained. "When the pandemic caused shipment delays, we were forced to liquidate inventory at significant losses, which triggered financial covenants with our bank."
Compounding the issue, D&T also suffered a major theft from their warehouse, further straining their financial position. "That incident made the bank even more nervous," Dave recalled, "and they decided not to continue the relationship, which left us scrambling for alternative financing."
That’s when Summar Financial stepped in.
The Solution
Recognizing the company's potential and understanding that its financial challenges were temporary, Summar Financial quickly tailored a factoring solution designed to meet D&T’s immediate needs while setting the stage for long-term recovery. Summar provided a $7.5 million line of credit, which included $5 million against receivables and $2.5 million against inventory. This offered D&T the liquidity it needed to pay off existing debts and stabilize its operations.
Dave was impressed by Summar Financial’s approach, stating, "I spoke with over 50 lenders during that time, but Summar Financial was the only one that offered a comprehensive solution. From the first conversation, I felt like they truly understood our situation and were committed to helping us navigate through it. The support from Summar was crucial—they took control of the situation and provided the guidance we needed."
Summar Financial’s approach went beyond simply providing funds; it involved understanding the specific challenges D&T faced and offering a solution that allowed the company to continue growing despite its setbacks. By focusing on the company’s long-term viability rather than its short-term struggles, Summar Financial was able to structure a financing deal that supported D&T’s immediate needs while laying the groundwork for future success.
The Results
With Summar Financial’s support, D&T was able to re-establish its working capital. The company took strategic steps to focus on more profitable clients and streamline its operations, leading to a modest profit by the end of 2023—a remarkable turnaround considering the losses it had incurred in previous years.
In just 18 months, D&T achieved equilibrium and regained the confidence of traditional banks. By mid-2024, banks were ready to offer the company a credit line, marking D&T’s successful transition back to conventional financing.
Summar Financial
Summar Financial’s timely intervention and customized financial solutions saved D&T from a critical downturn and positioned the company for long-term success. This case exemplifies how alternative financing can complement traditional banking, ensuring that businesses not only survive but thrive, even in the face of significant challenges.