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When Qualitas Trading USA Corp. of Miami began exporting lawn and garden products to Latin America, it financed its sales with bank-backed letters of credit. But LCs proved cumbersome and expensive, so Qualitas took a different tack.
Instead of sending a customer to a local bank to obtain a LC, the company checks their credit. If they meet requirements, Qualitas ships to them. To reduce its risks on these open-account transactions, the company buys credit insurance--a product that is gaining popularity among small and medium-sized exporters.
"I use credit insurance as a marketing tool," said Xavier Rivera, founder and chief executive of Qualitas. Rivera said that in the eight years since Qualitas switched to open-account …