In response to ongoing struggles over consumer financing, the swimming pool industry is seeing a number of new initiatives take hold.
Traditional and nontraditional lenders alike have either expanded the scope of existing loans or introduced new programs as customary avenues such as home equity remain largely dead ends.
Indeed, the housing crash of the past few years sapped the industry of its primary source of borrowing capital. As a result, long gone are the days when financing was an afterthought among homeowners.
“It’s still a huge problem,” said Travis Leonard, partner at A&G Concrete Pools in Fort Pierce, Fla., a Pool & Spa News Top Builder.
“None of the local banks here have programs for pools because they can’t repossess a pool,” he added. “A lot of people are pulling money from their [savings], borrowing against their retirement. And maybe 85 percent of our customers are now cash buyers.”
So while today’s financing options may not be ideal in the minds of most pool professionals, many concede it’s at least a step in the right direction because there simply aren’t many alternatives.
In a bid to fill the void, PoolCorp announced this week a partnership with Lending Club, wherein the distribution giant will invest $2 million in consumer loans in 2011.
Lending Club offers flexible terms and interest rates ranging from 6.78 percent to 25.41 percent, depending on the borrower. Once a loan is 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.
Though the peer-to-peer financing program is somewhat unconventional, PoolCorp officials believe the arrangement will help boost business for the firm’s contractor and retail partners.
“We’re happy to have this opportunity to assist our customers,” said Mark Joslin, vice president/chief financial officer at Covington, La.-based PoolCorp. “This is a different model, but it’s very interesting and attractive. Obviously, being non-equity based it’s not for everybody, but we know our dealers will be interested in having as many financing options at their disposal as possible.”
In February, Lending Club raised the cap on its home-improvement loans, including swimming pools, from $25,000 to $35,000. That month it also teamed with Viking Pools to offer financing to customers of the Jane Lew, W.Va.-based fiberglass pool manufacturer.
The result has been a fivefold increase in pool loans, said Scott Sanborn, chief marketing officer at Lending Club, based in Redwood City, Calif.
“A number of our borrowers have enough to get them started; they just need that little bit extra to get it done now,” Sanborn said. “The home-equity process may not be worth it for the amounts they’re talking about. We’re an alternative to what can be a very onerous, time-consuming process with the banks.”
Lyon Financial, which has facilitated pool financing for more than 30 years, now has a trio of programs, secured and unsecured. The firm has brought on some 150 new contractor clients in the past two months, and approved $1 million in loans since March 1, according to Dick Lyon, company president.
Based in Mooresville, N.C., Lyon’s strongest markets these days are found in the South and Southwest, he said, including Texas, Florida, Georgia and the Carolinas. Conversely, the toughest areas are California, Arizona and Nevada, all regions that were especially hard-hit by the recession.
At California Pools, a Pool & Spa News Top Builder based in West Covina, Calif., financing has been handled for years by Bruce Conn, president of California Equity and Loan in Trabuco Canyon, Calif. These days, Conn is advising some consumers to consider patching together resources, perhaps borrowing against 401(k) plans, in addition to paying cash.
“You want to sell the dream, the backyard paradise,” Conn said. “But at this moment we just need to get them swimming. So if a guy can only get his hands on $35,000, that may have to do in the short-term.”
Several years ago, Chandler, Ariz.-based Paramount Pool and Spa Systems launched its own financing division, Paramount Capital, to help pair borrowers with lenders. Unsecured loans in particular have come a long way of late, said Finance Manager Scott Pleasant, who added that applications — and approvals — in the first three months of 2011 have doubled from the same period last year.
“That’s where we’re seeing a lot of success,” Pleasant said of the program, which is available to all authorized Paramount dealers. “There’s also a lot more consumer confidence these days, and most of our applicants have assets. Basically, if people are buying pools in this economy, it generally means they’ve managed their debt well and have a good handle on their finances.”