Debt is a luxury that many small-caps can’t employ. If you’re like us, you’ve probably heard at some point that small-caps have more pressing debt exposure than large-caps either in terms of interest expense exposure, should rates rise, and/or total debt to market cap. But the reality is that most of small-cap debt is concentrated in a fewer number of companies. Much of this is due to the index’ high number of early stage BioPharma companies most of which do not have debt, and if they do, they are usually strongly positive net cash. Debt is not the primary choice of small-cap funding—equity issuance is. If a small-cap holds debt, it’s usually an indication of quality as normally only a more mature small-cap with either a track record of profitability or at least solid revenue growth can access the debt markets in size. We exclude Financials and Real Estate from most of this report since they use debt differently though the reality is their inclusion does not alter the main thrust of this note in that most of R2000 debt is held by a small number of companies and market capitalization. An old dictum says that if you owe the bank a million dollars, the bank owns you; but if you owe the bank a billion dollars, you own the bank. While that may play better for large-caps, it doesn’t apply to more than 80% of small-caps. In short, small-caps don’t have a debt problem.