Private Loan, Line of Credit, Credit Margin, Cash Advance: What Are the Differences?

The vocabulary of business financing is often a source of confusion. Private loan, line of credit, credit margin, cash advance, merchant cash advance — these terms refer to fundamentally different products, with distinct cost structures, approval conditions, and use cases.

This guide demystifies each one so you can choose the right tool for your situation.

Term Loan (Bank or Private)

This is the most "classic" product. You borrow a fixed amount that you repay in regular installments (monthly, generally) over a defined period at an agreed interest rate.

Bank loan: rates between 6% and 12% annualized in 2026, terms of 2 to 10 years, guarantees often required, approval time of 4 to 12 weeks. Accessible mainly to established businesses with a good credit history.

Private loan: offered by private investors or specialized funds. Higher rates (18% to 36% annualized depending on profile), but more flexible approval criteria and timelines of 48 to 72 hours. Often used as a bridge between two financial situations.

Best for: businesses that need substantial capital over the long term (equipment, expansion, acquisition) and can service a fixed monthly debt.

Line of Credit

A line of credit is a pre-approved facility that allows you to borrow up to a defined limit, repay, and borrow again — like a business credit card but with generally much higher limits and lower rates.

You only pay interest on the amount used, not on the total limit. It's the most flexible product on the market.

Bank line of credit: prime rate + 1% to 5%, limits from $25,000 to several million depending on your profile. Renewed annually. Often requires guarantees and a solid track record.

Revolving line of credit (alternative financing): some of our partners offer revolving credit lines without collateral guarantees. Rates are higher but accessibility is greater. Amounts from $10,000 to $250,000.

Best for: businesses with cyclical and variable liquidity needs — inventory purchases, seasonal needs, client payment delays.

Credit Margin

In practice, the terms "line of credit" and "credit margin" are often used interchangeably in Quebec. Technically, a credit margin refers specifically to an asset-secured facility (accounts receivable, inventory, real estate) — it's a secured line of credit.

A home equity line of credit (HELOC) is a special case: secured by the equity in your property. Rates are very low (close to mortgage rates) but it puts your real estate at risk.

Best for: owners of commercial or residential properties who want to access their asset value without selling.

Standard Cash Advance

This is the flagship product of alternative financing for SMBs. The investor advances you a lump sum that you repay through fixed daily or weekly payments drawn directly from your bank account.

Unlike a loan, it's not an interest-bearing loan contract — it's a contract for the purchase of future revenues. The cost is expressed in factor (1.30 to 1.55 depending on the file) rather than an annual rate.

Advantages: decision in 24-48h, no personal guarantees required, accessible to businesses refused by banks.

Best for: SMBs with regular revenues that need liquidity quickly — working capital, unexpected opportunity, urgent expense.

Merchant Cash Advance

A variant of the standard cash advance, specifically designed for businesses that process a significant portion of their sales by credit or debit card. Repayment is calculated as a percentage of your card transactions — typically between 10% and 20% of each transaction.

The major advantage: when your sales drop, your repayments drop proportionally. It's a product naturally suited to seasonality.

Best for: restaurants, retail businesses, salons, clinics — any business with a high proportion of card sales.

Advance Refinancing

If you already have a cash advance in progress, refinancing replaces it with a new advance, often at better terms (lower factor, higher amount, or longer term).

Refinancing can also allow you to obtain additional capital on top of the remaining balance of your current advance. This is called refinancing with consolidation.

Best for: businesses that have repaid their initial advance well and need additional capital or want to reduce their daily repayment load.

Invoice Financing

You assign your outstanding invoices to a financer who immediately advances you 80 to 95% of their value. When your client pays, the financer sends you the balance minus their fees. It's a way to turn your accounts receivable into immediate liquidity.

Best for: B2B businesses with long payment terms (30, 60, 90 days) — construction, professional services, distribution, manufacturing.

How to Choose the Right Product?

You need liquidity now and will repay within a year: standard or merchant cash advance depending on your revenue type.

You have recurring and variable needs: revolving line of credit.

You do B2B with long client payment terms: invoice financing.

You want to finance equipment or expansion over 3-5 years: term loan (bank if accessible, private if necessary).

You have real estate and recurring needs: home equity line of credit.

At Premion Capital, our role is to help you identify the right product for your specific situation — not to sell you what we have in stock. If now isn't the right time for a cash advance, we'll tell you.