The best way finance your business is through own capital. This means investing in you business directly. This is safe especially when going into a business whose Return on Capital is little at the initial stage. This makes the business owner so relax. Any loss suffered would not come with as much shock as if the finance were to come from a an eternal sources. Owned capital also has several other advantages. The profit of the business is shared by the business owner alone. There is not pressure from without to make profit. But owned finance could only do for a small business as most businesses require other sources of finance to thrive in the longrun.
Loan from friends and relative is quite similar to owned finance. When a business is co-financed by friends and relatives, there is less risk involved when the repayment plan is defaulted. Unlike bank loan, the heartache the borrower would experience is less. Friends and family would consider their previous relation with the business owner, and would not usually take actions that would hurt the business or it owner. Family or friend can opt for share of profit as a way of reducing the finance burden.
Bank loans are usually considered by many big organizations. The documentation alone would put a less serious borrower off. Default in repayment of principal sum and the accruing interest is could be a serious set back for the business. Many companies and corporation have gone down due to their inability to meet their loan obligations. Inflation is a great enemy of of bank loans as the borrower pay more that the borrowed amount.