I. The effect of capacity on applying for a loan
There are two factors that have a positive effect when leasing as an asset financing alternative in contrast to going into debt. One of them is the fact that, since the asset is owned by the leasing company, it cannot be encumbered by creditors of the company taking out the lease (more security for the lessor). The other is that the charge that leasing creates is often not evident in the books since it only appears as a liability to the checking account and not as the full obligation.

II. Comparison of decisions to make about debt acquisition versus leasing
A. Quantitative:
The financing interest rate, term, and conditions for debt existing on the market.

The tax shields for leasing, compared to the tax shields created by interest on a loan and depreciation of an asset during its useful life.

Cash flow after tax, deducting the present value for both options. The premises used in relation to the possible replacement value of the asset at the end of the lease period and the discount rate to apply. If dealing with property that may not be depreciated (e.g., land). The tax rate for the lessee (.e.g. totally or partially exempt companies)

B. Qualitative:
The effect of "off the balance sheet" financing (i.e., not having to record more liability than the lease payment for the next month and not having to record the asset that is being used with the positive effect caused on returns on assets). The effect of financing on the capacity to apply for a loan, beyond what is purely cosmetic; (1) the lessor, in case of bankruptcy by the lessee, owns the asset so it does not have to wait for liquidation to recover its investment, making the lessee a less risky credit candidate; and (2) if the property has a value to third parties, leasing may be the only path for a financially weak company to be able to have access to new assets.

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