You have a fantastic idea for a business you know you will love. You’ve done the research, you’ve analyzed competitors, put together a marketing plan, done some finance forecasting to determine how much money you need to start and how much you will be able to earn. Now, where is that start-up money coming from? You’ve just hit the biggest hurdle of starting a business, no matter what the size, being able to finance the business until it’s profitable.

Depending on the amount of funding you need for your business there are a few options that are available, including loans, grants, venture capital, and the age old favorite, borrowing from family and friends. So what are the pros and cons of each of these options?

Business Loans – Local banks and the SBA.gov are the largest funders of business loans in America. Taking out a business loan has its risks as you may need to put up personal collateral such as your home or other property. Once you have the loan however, the pros are that you still own the business and maintain complete control, unless of course you can’t pay your bills. Lenders often require a lot of paperwork including full business plans, financials and references. In the case of very small business you may run into issues with lenders that have high minimums like $100,000 when you only need $10,000. Micro-loans are becoming more popular but are still difficult to find today.

Business Grants – We’ve all seen the commercials on late at night telling us how the government offers free money for YOU to start your business, unfortunately it simply isn’t true. The government offers grants but they are typically only open to businesses that benefit humanity in some way such as disease research or technological improvements. You can find small business grants through Private Funded sources such as Grantized.com, but they are few and far between. The pros are that grants don’t have to be repaid, the cons are that they are hard to find, and often have strict application requirements.

Venture Capital – Venture Capitalists are business people who pool their money together in order to invest in other people’s businesses. VC is granted based on the viability of the business and the opportunity for the investors to make a profit on their investment. Some VC groups fund multiple businesses each year and provide additional benefits such as networking opportunities which can certainly help you increase your business knowledge. The downside is that when you accept VC funding, you are selling part of your company to the investors and they may insist on taking control of portions of your everyday business dealings, which could cramp your style.

Borrowing from Family and Friends – Family, you gotta love them, and most of the time they love you back. Your friends and family are likely your biggest supporters and know how excited you are about your new business. Asking them to invest is often the easiest way to come up with business capital, but they are also the ones that know your every move and how to reach you every minute of the day so there may be issues when it comes time to repay them. Burning bridges with a bank is one thing, burning bridges with the people that love you, is another.

Raising funding for a business can be scary, and there are certainly other options like credit cards (if it’s good enough for Ben and Jerry’s it’s good enough for me!), but it’s important to explore the reasons you need funding and the funding that you choose so you can determine if you can handle the ramifications if your business fails.