Leibniz argues that there must be a fundamental level of simple substances because composites borrow their reality from their constituents and not all reality can be borrowed. I contend that the underlying logic of this ‘borrowed reality argument’ has been misunderstood, particularly the rationale for the key premise that not all reality can be borrowed. Contrary to what has been suggested, the rationale turns neither on the alleged viciousness of an unending regress of reality borrowers nor on the Principle of Sufficient Reason, but on the idea that composites are phenomena and thus can be real only insofar as they have a foundation in substances, from which they directly ‘borrow’ their reality. The claim that composites are phenomena rests in turn on Leibniz's conceptualism about relations. So understood, what initially looked like a disappointingly simple argument for simples turns out to be a rather rich and sophisticated one.