Financial Freedom?

A slight loosening of financing coupled with consumers’ heightened interest could spark sales of vinyl liner pools.

By Erin Ansley

Edwards Pools began offering financing to its vinyl-liner pool customers last year. But the program didn’t stimulate sales. In fact, not one client applied for a loan.

“Their interest rate was outrageous,” says Tammy Edwards, office manager for the Logan, Ohio-based pool building firm. “People were interested but when they found that out, nobody went through the company.”

One customer who did follow up on the plan even discovered hidden fees and upfront costs, information Edwards says the financial company never gave her.

Eventually the builder shifted gears and started referring its clients to Lending Club, an online financial resource headquartered in San Francisco. Since posting the information on its Website in April, three of Edwards’ customers have been approved for unsecured loans at rates ranging from 6 to 12 percent depending on their credit scores.

Although the opinions are somewhat mixed, most experts agree there has been a slight loosening of financing in the last six to eight months. At the very least, more options have been introduced into the mix, says Scott Sanborn, chief marketing officer for Lending Club.

“We’re continuing to see a great deal of interest and traction offering personal loans up as an alternative for financing,” he says.

In March 2011, PoolCorp partnered with Lending Club, and the distribution giant reportedly invested $2 million in consumer loans last year. An additional five pool-related companies followed suit, including a vinyl-liner manufacturer, announcing an alliance with the program for its dealers. Sanborn also notes a higher number of builders who are referring the option to their customers.

Lending Club currently offers three- and five-year, unsecured personal loans up to $35,000 at a fixed rate. Interest rates range from 6.78- to 27.99 percent, depending on the borrower. Once approved, individual investors can buy a portion of the loan. Those investors earn money on the interest when the loan is repaid, and then have the opportunity to reinvest.

Overall, Sanborn characterizes the volume of loans approved since last year as dramatic both in terms of the amount of financing as well as the number of new partners.

“We went from not really being aware that a portion of our loans were being used for this purpose to doing over $2 million a month in loans for pools during the pool season,” he explains.

Other alternative lenders also have finalized a significant number of loans, signaling an improvement in the borrowing climate.

Charleston, S.C.-based AMS Financial Solutions’ numbers have increased nearly 400 percent over 2011, says Brandon Perry, the company’s president. However, he was unable to disclose the exact number of loans approved.

“We are seeing it go in the right direction, but it’s not going very fast,” he notes.

Perry attributes this recent spike to a pent-up demand from the consumer and is unable to predict whether it will continue.

“People that may have wanted to do a pool but didn’t feel comfortable with the expenditures are moving towards purchasing this year,” he explains. “It was so tight for so long that even a little bit of a break and a little bit of a loosening in the credit standards has been beneficial for everybody,” he adds.

Currently, AMS offers a $25,000 secured loan with a 10-year term and an interest rate of roughly 7 percent. The firm has a network of more than 2,500 distributors, manufacturers and pool building companies who are dealer partners with its swimming pool division www.MyPoolLoan.com. Launched in 2004 as a lender for the pool industry, the consumer finance specialist has grown to serve multiple facets of the construction and home improvement sectors.

“Most would be able to advertise a $25,000 pool with a payment of $296 a month, which in vinyl is a very affordable payment,” he says. “In a way, it creates the opportunity for somebody who thought they were in market for an aboveground pool to get an inground pool.”

Of course this requires good to excellent credit, and while there is no hard and fast minimum score, one in the upper 600s is a good starting point, adds Perry. All told, AMS offers 12 different programs to accommodate less than perfect credit with scores as low as 580.

Despite these emerging options, however, additional barriers to obtaining loans remain. The industry — like other luxury item categories — is still working to recover from the effects of the economic downturn. A devaluing of homes across the country has left millions with little to no equity in their properties. Those who didn’t lose them to foreclosure but who are upside down on their mortgages have no option but to stay put for the foreseeable future. But these are the very individuals who wish to invest in their yards, says Dan Lenz, vice president of All Seasons Pools & Spas in Orland Park, Ill.

“The nice thing about a couple of these programs are that they are not tied to any kind of a home equity line, so if it does become available it is not based on the home value, which nobody around here has, and for someone to be able to have access to have some line of credit based on their ability to pay is better than having it tied to a piece of property,” he observes.

While he agrees there are more options than two years ago when “you couldn’t find any line of credit for anything,” Lenz has not witnessed an increase in approved financing for his vinyl-liner pool customers.

“We have had a few clients in the last [few months] who have applied, and although [the financial company] advertised loans up to $35,000, it wasn’t extended anywhere near that limit so it didn’t really help our customers,” he says.

Ultimately, his customers either use revolving credit or cash, or they refine the project to cut some of the expense. A few even break their projects up into different stages and pay for each part separately when they have the funds available, a trend he says has increased in the last two years. “You think they will do the first part and we’ll never see them again, but they do come back and say, ‘We’re ready for phase two.’”

Some vinyl pool builders are taking an even more unique approach to helping their customers pay for their projects. Recently Randy Budd suggested one of his customers borrow from a 401k plan, and he has since had some success with this “out-of-the-box idea.”

“A financial adviser might say not to do this but depending on the plan you can borrow up to 10 years with favorable terms of repayment,” says the president of Budd’s Pool Co. in Deptford, N.J. “We have had some success with it, and it’s something that most people don’t think of.”

Meanwhile, a number of vinyl pool builders haven’t seen any change in financing.

Ginny Mulvaney, president of Custom Pools in Hopkins, Minn., has continued to look into financing options each year but has yet to find something that would benefit her clients. These days, most of them don’t even ask about financing. Instead they already have the money available through some other means.

“It appears that the rates we get set up are more than what most consumers can get themselves with their own bank and equity lines,” she says.