Gross profit is what remains from your sales revenue after deducting the direct costs of producing or delivering what you sold. Net profit is what remains after every other cost has also been deducted — overheads, staff costs, interest, depreciation and tax. Gross profit sits near the top of the profit and loss account; net profit sits at the bottom.
The distinction matters because the two figures answer different questions. Gross profit tells you whether your pricing and production costs work. Net profit tells you whether the business as a whole is viable once you have paid for premises, administration, borrowing and everything else that keeps the doors open.
As an illustration only: if a business invoices £100,000 in a period and the materials and direct labour behind those sales cost £60,000, gross profit is £40,000. If rent, salaries, insurance, interest and other overheads come to £30,000, net profit before tax is £10,000. The same £40,000 gross profit could produce a very different net figure in a business with a heavier overhead base.
Exactly which costs count as direct and which count as overheads depends on your accounting policy and your sector, and the split is not always obvious. This is general information rather than accounting advice — your accountant should confirm how your own accounts are constructed.
Lenders typically look at both. Gross profit indicates whether the underlying trading model works; net profit and the cash it generates indicate whether repayments are affordable.