Net profit
Also called: net income
Net profit is what remains after every expense, including costs, operating expenses, interest, and taxes, is subtracted from revenue.
Net profit, also known as net income, is the money a business keeps once all of its expenses are taken out of revenue. Starting from total sales, you subtract the cost of goods sold, operating expenses, interest, and taxes, and whatever is left is net profit. It sits at the bottom of the income statement, the reason people call it the bottom line. Net profit shows true profitability, since it accounts for every cost of running the business, not just the cost of making the product.
Lenders treat net profit as a direct read on whether a business can afford new debt. After all, payments come out of the money you actually keep, not the money you gross. An underwriter looks at net profit across several periods to judge consistency and to estimate how much room exists for a new obligation. Steady positive net profit strengthens an application, while thin or negative profit can shrink an offer or shift you toward a product sized to your real earnings. Be prepared to explain any owner draws or one time costs that pulled the number down on paper.
Common questions
What if my net profit is low because I reinvest in the business?
That is common, and a lender will listen. Show where the money went, such as new equipment or hiring, and pair the P and L with bank statements so the underwriter can see healthy cash flow even when reported profit looks slim. Explaining add backs like owner pay can also reframe the real earnings picture.
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