Restaurant growth may suffer as GE slows new lending

GE Capital Solutions, Franchise Finance, the largest restaurant lender by assets and clients, confirmed Friday it would be “much more selective” and defer rate quotes on new deals as the credit chill that began last year becomes a freeze in the face of Wall Street uncertainty.

GE Capital spokesman Stephen White said that while the Franchise Finance division was still active in the restaurant industry, it would continue to quote deals only “where competitive and appropriate.” GE also said it would honor any existing arrangements.

“We are being much more selective and have raised our hurdle rates, which has slowed deal approvals,” White said. “We’re still active -- less so in the last two weeks -- and are simply taking more time as the environment settles.”

He added that GE Capital would cease providing rate quotes “until things settle down,” but it would continue to accept credit packages.

According to lenders, operators and industry analysts, almost all financial institutions are re-evaluating their lending positions in the face of the credit crunch and the uncertainty surrounding a bailout plan for embattled banks on Wall Street. The situation, while changing daily, does guarantee a higher cost of capital, less available leverage and tighter lending structures for operators that need funding. It also could have a dramatic effect on the restaurant industry’s growth plans, which rely heavily on franchise activity.