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Friends and family
Pros: With a review process that may be as simple as a phone call, the F's are often the most enticing option. "It's usually a minimally documented transaction without any lawyer fees, says Eric Siegel, a lecturer with the Wharton Entrepreneurial Programs. "It's a fast, low-cost benefactor relationship with Uncle Harry who has a lot of money and just wants to help you out."

Cons: Not being able to look Uncle Harry in the eye come Thanksgiving because your business went bust. "There's definitely a psychological cost," Siegel says. "You'll feel much worse about losing their money than a bank's money."

One option: Virgin Money launched in the U.S. late last year with a system to formalize loans between friends and family. Making the loan official may help reduce awkwardness.

NEXT: Factoring

LAST UPDATE: Sep 30 2008 | 11:23 AM ET
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