Loans are a great, affordable way to get a small business off the ground. But they're not for everybody. Personal sources of financing can work just as well, and may be the entrepreneur's "Plan B" if attempts to secure a commercial loan are unsuccessful.

L-A SCORE Chairman Jack Tetreault advises that, "Although self-financing options may give you more control and flexibility over your start-up capital, special care is essential to make sure they are used wisely. A misstep puts more than your small business at risk as it can also endanger the long-term security of you and your family."

Before you dip into your savings or tap the equity in your house, make sure you have a realistic plan to meet your existing obligations, such as mortgage, utility bills, vehicle payments, insurance and daily living expenses. Be sure to consider "worst-case" scenarios, such as a spouse losing his or her job, major car repairs or serious health issues. The likelihood of such events may be remote, but the consequences to your financial security will be very real if they do occur.

A good preventive measure is to designate certain funds as off limits for use in your business. Certain retirement accounts may also be untouchable due to the tax consequences and heavy penalties associated with early withdrawals.

Friends and family members can be good sources for start-up capital. However, history is full of ruined businesses and personal relationships because money was not repaid as expected, or the investor demanded a say in how the business was run.

Tetreault cautions:, "Even if your benefactors place no conditions on the money, make sure everyone clearly understands how the funds are to be used; the repayment terms and amount of interest, if applicable; and what role, if any, contributors will play in the business. Then, put everything in writing and have all parties agree to the terms."

Credit cards can also be a source of quick cash for your business, but low limits and high interest rates usually make them useful only as a last resort, or as a short-term cash flow bridge. It's best to use them only if absolutely necessary, and if you have the ability to pay them down quickly. Otherwise that debt can quickly spiral out of control. Also, carefully scrutinize equipment financing offers from retailers and manufacturers. Their terms may be more restrictive and expensive than credit cards.

To learn more about starting or improving your small business, contact SCORE. The organization is a nonprofit association of more than 10,500 volunteer business counselors who provide free confidential counseling and training workshops. Call L-A SCORE at 782-3708 for additional information and an appointment.