The lower the ratio, the greater the proportion of total capital that is invested, not borrowed, by the owners. A high ratio reflects greater financial leverage, which means increased financial risk. Companies with a high degree of leverage may not be able to survive economic downturns as readily as their competitors who are operating with less debt. This yearly publication collects financial data from a broad range of industries and compiles it into industry averages. By comparing your capital structure against the industry norm you can develop a strong sense of the acceptable level of debt you should be considering.
Adequate collateral is another necessary ingredient for any good loan package.
Bankers want to know how they will get paid if you are not able to make your payments. Collateral addresses this concern. It is security pledged toward the repayment of a loan. If for some reason you don't pay, the bank can offset its losses by liquidating collateral. Furthermore, not only will the bank want to secure the assets of the business, in many cases they will expect you to pledge your personal assets, as well.