GE Capital's franchise finance arm, one of the largest lenders to restaurant operators, says it is becoming more stringent in pricing and issuing loans for new franchisees.
Though GE Capital spokesman Stephen White stopped short of saying a total freeze had been adopted on lending to new franchisees, he said the franchise finance arm has become more critical in initiating loans but continues to do business with existing customers.
"We are still active in the restaurant industry, and we continue to quote deals where it's competitive and appropriate," Mr. White said. "In this environment, we're taking a longer look and even a closer look than we have in different times, and that just makes sense."
Stephen Vaughan, the chief financial officer of Sonic Corp., said that franchisees of the drive-in chain have been notified by GE Capital's franchise finance arm that it will temporarily stop lending to them. Other restaurant industry dealmakers said last week that they have been turned away from the General Electric unit's franchise lending practice when seeking new loans.
Other major lenders to restaurant franchisees include Wells Fargo & Co. and Wachovia Corp.
Last week GE said it would try to shrink and pare borrowing at GE Capital. GE, whose financing unit accounted for 45% of the parent's profit last year, aims to cut down that share to 40%.