(May 30) Try as it might, factoring can’t shake the stigma of being a desperate business measure.

Factoring, loosely defined as selling accounts receivable for quick cash, is described as either a legitimate way to get a loan without a bank or a big red flag indicating credit problems.

Not surprisingly, few companies openly talk about using a factor.

One of the agriculture industry’s biggest factoring companies, Agricap, has worked for five years to improve the practice’s image, said president Rick Jones. The company offers several other means of financing for companies that can’t get what they want from banks, Jones said.

There’s still shame associated with factoring, Jones admitted, although the practice is common in European farming and in other U.S. industries.

In any business, but particularly small businesses common in the produce industry, cash flow can mean everything.

As firms look into alternate means of financing like factoring only in emergencies, desperation remains not only the perception, but also the reality.

Ideally, companies would take a long-term view and negotiate a credit line with a more mainstream financial institution to avoid cash flow headaches.

For those who can’t secure such a loan, it would be wise to develop relationships with factoring companies before the need for a short-term loan presents itself. Get to know how the factoring process works before you need to go that route.

On the flip side, grower-shippers should protect themselves by ensuring their buyers are financially sound and not the type that relies too heavily on factoring because the grower will be left in the red if a wholesaler goes out of business after factoring and leaves little in the PACA trust to claim.

Buyers and sellers at all levels must know their customers — and when they stand to get paid.