There has been a major switch from equity to debt finance in recent years, associated with a fall in the long-term rate of interest. The paper explores the macro-economic causes of the sea change in interest rates (lower budget deficits, independent central banks, lower inflation expectations) and the micro-economic consequences. Firms are taking on more debt partly for tax reasons and partly because at lower interest rates they have better interest cover. This means they can increase their borrowing at lower risk and hence at lower cost. An examination of a cross section of UK firms from the FTSE 350 shows two major influences on the debt-to-value ratio of large firms. Firms with healthy cash flow are allowed to borrow against that income; and firms whose income is relatively invariant across the economic cycle (as measured by a low asset beta) can afford a higher level of debt.