US Small Cap Interest Burden Hits 6-Year High as Rate Pressure Mounts

Small US companies are facing mounting pressure from interest costs, with borrowing expenses now consuming 31% of EBITDA for Russell 2000 index firms—the highest level in at least six years. This ratio has more than doubled since 2020.

In contrast, S&P 500 companies are in a far better position, with interest costs representing just 6.7% of EBITDA, down from 9.5% in 2020. The disparity stems partly from debt structure: roughly 30% of Russell 2000 debt carries floating interest rates, compared to only 7% for S&P 500 companies.

Meanwhile, nearly 40% of small-cap companies in the index remain unprofitable, approaching historical highs. Analysts say small businesses need interest rate cuts more urgently than ever.