A factoring company advances sums to Corporation A at a discount to the face value of the discounted receivables, and then applies the amounts collected to reduce the advance amounts. For accounting purposes, the accounts receivable remain on Corporation A's balance sheet and the amount received is recorded in current liabilities as an item due to the factoring company. Should the amount owing to the factoring company be included in the capital computation under s. 181.2(3)? After noting the distinction between “loans and advances” and “all other indebtedness” in ss. 181.2(3)(c) and (f), CRA stated:
"[I]indebtedness " has a broader meaning than the term "loans" since it includes not only the lender-borrower relationship but also a seller-buyer transaction. Indebtedness means an obligation to pay a sum of money. A loan is usually understood as the delivery to one party and receipt by another party of a sum of money which it has been agreed, expressly or impliedly, will be repaid with or without interest. The term "advance" has two possible meanings, namely that of a loan in the proper sense of the word and that of a deposit to be applied to the price of a contract before it is performed.