What is Interest Revenue? You may have heard the term before but not sure what it means. Generally speaking, this is a term used by investors when calculating the profit and loss of a company. The bottom line is that any company can calculate the amount of interest received on its balance sheet as long as the balance sheet includes all transactions involving the company during a specific time period.
In general, this represents the money from the borrowings taken out for capital expenditures and increases in retained earnings. It can also include money that is received under lease agreements, stock options, dividends, and many other sources. Basically, anything that a company does that causes an increase in retained earnings is reflected in what is termed revenue. However, note that what is termed revenue is not the same thing as profit.
So, what exactly is the revenue? It is the income that a company earns after paying all expenses and then paying taxes on it. Of course, the amount will vary depending upon the nature of the company. The one that received a grant from the government may be able to deduct what is termed interest from its income tax return. There are several types of revenue that a company can receive.
One is referred to as gross receipts revenue, which represents what the company buys from suppliers at wholesale prices and then resells or sells to customers. Another type is the cost of good sold, which refers to the price of goods sold to the end user. The third type of revenue is retail sales revenue, which reflects the price at which the final consumer purchases its products. And finally there is depreciated revenue which simply means the cost of maintaining the physical plant and equipment.
If you are wondering what is interest revenue, the first step is understanding what it actually is. Generally speaking, when a company borrows money to invest in a facility or to purchase raw materials, it owes that money back along with interest. However, if the company makes interest-only payments instead of paying back principal, it is not actually collecting any interest revenue. When a business receives a federal loan, it may have its interest-free term extended for up to 18 months after which the repayment begins. The longer the term, the less interest the company will pay on its debt.
One of the most popular federal loans available to businesses is the Small Business Administration (SBA) loan. SBA loans are specifically targeted to small businesses and are designed to help these companies succeed and grow. To qualify, the company must show potential success and potential growth; however, there are no credit requirements.
In addition to federal loans, there are also private foundation grants that can provide capital for businesses. For example, the Ford Foundation provides grants for many reasons, one of which is to support research. You can also find private foundations that provide what is called equity for nonprofits. This funding is provided as long-term equity and is not necessarily paid back. The IRS calls this non-loan money. Nonprofit organizations must obtain this type of equity from charitable organizations or special interest groups.
Because many businesses do not have much money to invest in equipment, what is interest revenue can act as their only means of obtaining needed funds. For those who do have enough cash, there are several routes they can take. They can use their credit cards to make purchases or take out cash advances. Finally, many investors may provide startup capital to aspiring businesses. If you have an idea for a business but do not have the required financing, consider what is interest revenue as a source of capital.