Quite often I am asked the question, is it easier to get $1,000,000 or $100,000? Most of the time my answer is, it depends. It depends on what is the purpose for borrowing the money.

Case in point, if you are seeking to purchase a home, you will be required to submit the following documentation: W2, tax returns, pay stubs, bank statements, credit report, rental / mortgage payment history. If you are seeking a business loan, you will have to submit the same information along with some additional information: a business plan, Profit & Loss statement, and a rent roll & cash flow statement (investors). The difference is as an investor the income derived from the business or real estate carries more weight than your personal income. From a lenders standpoint, we refer to this as Debt to Income Ratio (DTI) and Debt Service Coverage Ratio (DSCR). DTI, typically represents 28/45 of your total income compared to your monthly mortgage payment (28%) and the other represents your monthly mortgage payment along with all of your additional debt (45%). Whereas, DSCR typically represents 1.0 - 1.2 of the Net Operating Income (Gross Operating Income - Expenses = NOI) compared to the monthly mortgage payment. So for every $1.00 spent on your mortgage payment your NOI should represent $1.20.

Since DTI is based solely on your personal income, it is typically easier to obtain a real estate loan because the income is derived from the current leases in place from the tenants within the building. Obviously the next question is the down payment, however if you have an excellent business idea and a well written business plan then next step is to address potential investors. Unless your dealing with family members, most investors want to know what is your idea, how much do you want to borrow, how long will it take for you to pay them back and how much money will they make.

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