Repair the Oven or Replace It? Restaurant Equipment Financing Math for a Milledgeville, GA Kitchen

The choice between a repair and a new oven starts with the oven, not with the loan. A written report from the technician who opened it answers most of the first questions, and it is worth asking for one before calling anyone about money.

A useful report names the failed part and prices the repair with parts and labor on separate lines. It says whether parts for the model are still made, lists any other worn parts the technician noticed with rough prices, and gives the oven's age from its data plate or the original invoice.

An oven with one failed part and nothing else worn is a different case from one whose report already lists a second repair. The second kind is where a replacement quote earns a closer look, since the restaurant may otherwise pay for the same oven twice in a year.

In an invented example, the lower oven of a Milledgeville, GA sit-down restaurant's double-stack convection oven stops heating. The invented repair quote is $3,418 for a blower motor, a control board and the labor to fit them.

The oven is already owned, so the repair is a running cost rather than new equipment. On an invented six-month working capital loan priced at 15.7% a year, the repair runs $596.04 monthly; the six invented payments come to $3,576.24, including $158.24 of interest.

Paying the invented $3,418 straight from the bank account avoids that interest, as long as the account can spare it without leaving the next payroll or food order short.

A repair adds no new unit that a partner could hold as collateral, so a partner may look mostly at the restaurant's deposits and the payments it already carries when it prices a repair request.

A credit line draw is another way to carry a repair bill for a few weeks, if the restaurant already has a line open; the draw's interest runs only until it is paid down. A term loan is a third route a partner may offer for either quote.

The same invented restaurant also asks for a replacement quote: $15,985 for a new double-stack convection oven, delivered and set in place. A freestanding oven can go on an equipment financing request in which the oven itself may serve as collateral.

At an invented 11.4% a year over 48 months, the new oven's payment would be $416.25. The 48 invented payments come to $19,980.00, of which $3,995.00 is interest, and the first invented payment splits into $151.86 of interest and $264.39 off the balance.

The gas connection or electrical hookup for the new oven, and any change to the hood above it, is property work outside this site. On the call, the owner gives the oven price and the installer's price as two separate numbers.

The invented repair's full cost, $3,576.24, equals a little more than eight and a half months of the invented new-oven payment. If the repaired oven then runs well for longer than that, the repair cost less than the same months of payments on a new oven would have.

The comparison is about timing, not a verdict: the new oven's payments also buy an oven the restaurant will own for years, and a second repair on the old one adds its own cost. Whichever way the owner leans, four records back the request:

• The technician's written report and the repair quote.
• The replacement quote with its model number, listed apart from the installer's price.
• Recent bank statements for the account the payments would come from.
• Card processing statements, if most of the restaurant's sales arrive by card.

A partner may price the two requests differently and may ask for different records for each. Comparing any offer by its total cost and its length, not only its monthly figure, keeps the repair and the replacement on the same footing.

The restaurant page covers mixers, ovens and card-sales advances for Baldwin County, GA restaurants, and the Blackdale blog holds the other posts in this series.