In yet another blow to an already ailing industry, GE Capital Solutions, the largest restaurant lender in the US, announced Friday that their Franchise Finance division plans to be “much more selective” with new restaurant lenders, even deferring rate quotes on new deals.
“We are being much more selective and have raised our hurdle rates, which has slowed deal approvals,” [GE Capital spokesman Stephen] White said. “We’re still active — less so in the last two weeks — and are simply taking more time as the environment settles.”
With recent fall of AIG and Lehman Brothers, it seems as though funding options are dwindling rapidly. According to National Restaurant News, GE’s recent decision reflects a pullback by Bank of America in their lending to McDonald’s franchisees in particular. Experts believe the current merger of Bank of America with Merrill Lynch, another restaurant lender, indicates the two money giants are busy reviewing their portfolios, noting that the pullbacks are “disconcerting to say the least.”
The lending freeze “could curtail not only new unit development, but the refranchising plans of major franchisors who have counted on the sale of corporate locations to franchisees.” As lending options decrease across the board, we’ll have to stay tuned to see what kind of affect this will have on individual restaurant owners and operators as well.