Russell 2000 Interest Expense Hits 31% of EBITDA, Highest in 6 Years
Interest expense now accounts for 31% of EBITDA among Russell 2000 companies, the highest level in at least six years, more than doubling since 2020. In contrast, S&P 500 firms carry interest equal to 6.7% of EBITDA, down from 9.5% in 2020.
Small-cap U.S. companies are under growing financial strain as interest expense consumes a record share of earnings. For Russell 2000 firms, interest payments now represent 31% of EBITDA — the highest level in at least six years and more than double the share in 2020.
By comparison, S&P 500 companies have seen their interest burden decline, falling to 6.7% of EBITDA in the latest period from 9.5% in 2020. The disparity is partly explained by debt structure: roughly 30% of Russell 2000 corporate debt carries floating rates, versus about 7% for S&P 500 firms.
A near-record 40% of Russell 2000 companies remain unprofitable, underscoring the pressure from elevated interest costs. The data highlights how smaller, more leveraged businesses are particularly sensitive to the current interest rate environment.
Source: The Kobeissi Letter