Seeking Capital? Ask Friends and Family--Maybe After your own money, your friends and relatives are the next best source, but be cautious.

Friends and family know you're trustworthy and competent, solending money to you doesn't seem so risky. However, borrowingmoney from people you know has its own risks. The relationship canbe threatened if your business fails and you can't repay theloan. Mixing money with friendship or love creates a potentiallyexplosive combination. Some entrepreneurs assume that receiving apersonal loan from a friend or relative means they can take theirtime paying it back. And some people are willing to put up money toget your business going, but they regard their investment as a freelicense to meddle in your affairs.

Excerpted from Starting a Home-based Business