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Consumer Credit Insurance: An Uncertain Future

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If you have ever taken out a home, car, credit card, or personal loan, you might have been unwittingly sold consumer credit insurance (CCI), a type of add-on insurance meant to protect the consumer in case an unexpected circumstance causes them to be unable to complete their payments.

Even though this form of insurance is quite common in many policies and premiums, the Australian Securities and Investments Commission (ASIC) has received a number of complaints regarding CCI, identifying potential breaches of the law where this form of insurance fails to deliver honesty, efficiency, and fairness to the consumers.

In this article, we will examine the definition of CCI, its potential concerns, as well the expectations held for this form of insurance in the future.

What is CCI?

Consumer credit insurance (CCI) is a form of add-on insurance that is meant to protect consumers in unexpected events such as involuntary unemployment, disability, accident and sickness, and death. The CCI premium, along with the length and amount of cover, are connected with the particular loan, with every policy having unique limits, features, and exclusions.

Important details of the specific policy can be found in the Product Disclosure Statement or Policy Schedule, which should be provided with each loan sale. Although CCI might be difficult to find, it can be located in places such as loan contracts and statements, bank statements, and credit card statements.

What are the concerns?

While consumer credit insurance might be useful and important for some, this type of insurance presents a number of reoccurring issues. One of the most notable problems are harmful sales practices, where dishonest salespeople add CCI to a loan without explaining what it is or how it operates, especially in cases where such insurance serves no practical use to the consumer.

Furthermore, CCI premiums tend to be exceptionally expensive, often including high interest charges that tend to outweigh the costs of premiums. In addition to providing low claims ratios, approximately 9 cents on the dollar, CCI claims are frequently rejected as well, due to deceitful policy exclusions and the difficulty of making a claim, thus often resulting in withdrawals.

Can you get a refund?

In case you have unwittingly purchased consumer credit insurance as well, you might be entitled to a full refund of the foregoing costs. This can often result in compensations as high as several thousands of dollars, particularly when it comes to loans and policies where honesty and transparency were evidently lacking.

In that case, the best course of action might be to hire the services of an experienced professional who will allow you to establish your claim on a ‘No Win No Fee’ basis. This means you will have the support of successful industry experts, along with the security of knowing you won’t have to make any payments in case your claim is unsuccessful.

Why now?

Consumer credit insurance has been on the agenda for decades, with ASIC taking up responsibility in 2010, and issuing its first report the following year. However, the most recent project began in 2017, including 11 lenders and their insurers, and has resulted in a detailed 2019 report, as well as targeted investigations aimed at enforcing action and remediation.

With the aim of bringing transparency and rectification to the issue, the report found CCI to be products of poor value sold under harmful sales practices, thus raising awareness of the issue and leading many Australians to enforce claims.

New expectations for CCI

Using its new Product Intervention Powers, the report issued by ASIC also clearly states future action that needs to be taken regarding CCI, as well as specifically referring to how Distribution Obligations and Product Design will support the implementation of these new expectations.

Among others, expectations regarding product value and design might be most important for consumers. Claim ratios now must be higher, benefits have to reflect consumer needs, lenders have to assess products before selling them, and products need to be unbundled so that sections can easily be chosen.

Sales practices have to be improved as well, with no unsolicited phone sales and hard filters on eligibility, while requiring clear, positive, and informed consent. Including the enhancement of post-sale conduct, continued coverage now has to be confirmed, premiums mustn’t be charged for unavailable covers, and annual communication and reminders about limits, prices, exclusions, and potential relevant claims need to be maintained.

Evidently, consumer credit insurance has had a difficult and troubled past, often being sold in dishonest and unfair ways. Hopefully, with new guidelines, expectations, and a raised awareness, the sale of CCI will become more transparent and sincere in the future.

Carolin Petterson is a Business Lady/Content Marketer and contributor for number of high-class business and marketing websites.

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Looking to Make a Career Change? Ask Yourself These 3 Questions

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Are you stuck in a career that feels like the wrong fit? Whether you aren’t excelling as quickly as you’d hoped or feel a sense of dread at the thought of heading to work each morning, landing in a career rut is far from uncommon—in fact, more than half of all Americans report being unhappy with their jobs. 

There are a variety of reasons for wanting to make a career change. Our interests, goals and priorities change and shift over time, and it’s possible that the dream role you took five or ten years ago simply isn’t the best match anymore. Or, maybe it was never the right match and you’re finally ready to do something about it. Whatever the reason may be, making a career pivot is entirely achievable. With the right strategies and a solid action plan, you can align yourself with a new career vision that’s more suited to your interests and values. 

To help you sort through the mental clutter and get realistic about the type of roles that you should pursue, there are a few helpful questions you can ask yourself. 

1. What have you learned from your past jobs?

While you may feel like you wasted a lot of time in roles you didn’t love, don’t be so quick to write off the time you put in—there’s a lot of value in the experience even if you didn’t enjoy it. Why? Because it gives you insight into understanding what you don’t want in a job. 

Take some time to carefully evaluate your past or current positions. Make a list of pros and cons, and get specific. You might list things specific to the duties you were responsible for, the company culture, the physical office environment, what your work hours were like, pay, etc.—the sky’s the limit.  Figure out what it is about each item on your list that you liked or disliked, and use it to guide you towards a role that aligns with what you know you do and don’t enjoy or value. 

2. What job would you do for free? 

This question helps you think about your career in the context of what you genuinely enjoy doing. Ask yourself: if money were no object, what job would you choose? While salary is certainly an important factor in determining the right career, it can be easy to let that factor alone determine the types of jobs we pursue. This question is great to get you thinking creatively about different jobs that truly excite you and can get you headed in the right direction. 

3. What makes you happy? 

While this might seem like an obvious question, you’d be surprised how often it gets thrown out the window when it comes to a career. Take the time to self reflect and get honest with yourself: what truly makes you feel content? 

What fuels you, motivates you, or gives you purpose? Can you think of the times in life you’ve been the happiest? What were you doing? Who were you with? Thinking deeply and critically about these types of questions offers valuable insight into the types of positions that can complement your life and fuel your passions. 

Making a career change can feel daunting, or even impossible. But the first step is simply believing it’s possible. Take care to remind yourself that there’s truly no shortage of job opportunities out there, and there’s nothing stopping you from finding one. With a commitment to yourself and a plan of action, making the switch to a more fulfilling career well within reach! 

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Is a startup accelerator program a good choice for me?

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Absolutely! If accepted into the right program, there is no better way for an early-stage startup to scale and find the best investors. But you may wonder how to go about it. Since 2005, accelerator programs have become a trend in the investment sector. Globally, there are close to 200 active startup accelerators today. In this sea, how to choose the right fit? Let’s begin with the basics.

What is a startup accelerator?

Startup accelerators are intensive mentorship programs. They help startups crunch 3-5 years of the growth process into 3 – 6 months. Yes. You heard that right. This is why they are called ‘Accelerators’. Most of them provide a seed fund of $10K – $25K in exchange for 0 – 10% equity in graduating startups. But accelerator programs are best known for their ‘Demo Day’, the final day at the end of the program when startups pitch their accelerated, scaled-up pitch decks to potential investors. That is the moment of truth. Apart from these, there are upcoming programs that offer a longer engagement.

Broadly, based on their operating structure, startup accelerators are of three types:

  1. Venture funded: These are driven by Venture Capitalists with the sole aim of profits. They look for quick and massive ROI over a short period. The startups they choose to fund must show a promise of higher returns over a 3-5 yr period when compared to regular investment instruments.
  1. Government funded: These accelerators have a broader goal beyond short-term profits. They nurture startups with a potential for the greater good such as job creation, reviving local economies, creating applications for government projects, staying ahead in the global competition for tech innovations, and the likes.
  1. Corporate funded: Corporate-sponsored startup accelerators nurture new ideas usually to further their business vision. For example, giants like Microsoft, Google, Facebook run accelerator programs to support innovations. If it fits, they might end up acquiring some of them.

Beyond these, startup accelerator programs have defined goals. Their operating industry, funding structure, mentor network, skill development programs, course duration, on-site requirements, investor network, alumni support, and geographies are well defined. So make sure you thoroughly research various accelerator programs before choosing the right one.

First startup accelerator – Y Combinator 

This is where the accelerator story began. In 2005, Paul Graham, Jessica Livingston, Robert Morris, and Trevor Blackwell founded a 12-week on-site program for early-stage startups. Their flagship program based in Mountain View, California accepts two batches a year focusing on finance, impact investing, and virtual currency industries. They have a special focus on black/African, American-led, and women-founded startups.

Over the years, Y Combinator has diversified its accelerator programs to suit various geographies. They excel not only in their on-site curriculum but alumni support as well. Startups graduating out of Y Combinator become part of an elite network of entrepreneurs, investors, and industry experts. Y Combinator also runs an online Startup school that is accessible from anywhere in the world. As of 2019, they have made 4000 odd investments valued close to the US $155B. Today, Y Combinator is the most successful startup accelerator program in the world.

What do startup accelerators provide for startups?

Startup accelerators provide the best growth opportunities. Besides the mentorship, networking, and the basic seed fund, they do not promise success but the best shot at it. Here are some of the opportunities you can expect from a startup accelerator:

  • One-on-one meetings with industry experts and mentors
  • Cohort-based co-working opportunities with fellow founders
  • Progress monitoring and evaluation
  • Capacity building of the Startup business process
  • Possible connections with early adopters and channel partners
  • Focused, goal-driven work culture
  • Cross-learning and problem solving
  • Experiential learning
  • Access to potential investors on demo day, extended network

Pros and cons of startup accelerator

As an idea, accelerator programs are great. But if you are not ready for the fast ride, these programs can set you back massively. Time is the most precious resource in a startup journey. Before committing to an accelerator program that usually demands the presence of at least one founder and the core team for the entire duration of the course, it is best to analyze all aspects of it. Here are some of them:

Benefits of startup accelerators:

  • Focused training to raise funds from top investors in the industry
  • Assured seed fund at graduation
  • The startup journey can be lonely. Accelerator programs create cohorts for founders across various industries to brainstorm and learn from each other
  • Build strong relationships with mentors, industry experts, and alumni
  • Social validation. Graduating from top startup accelerator programs lends a unique identity to new startups in the market. Investors tend to rely more on their capabilities compared to other companies trying to make it on their own.

Problems of Startup Accelerators:

  • Demands 100% presence. This is a non-negotiable term with most startup accelerators.
  • Demanding schedules. Accelerator programs run on tight schedules. They facilitate ‘learn on the go’. So there is learning and immediate application.
  • Equity dilution. Every accelerator demands equity in exchange for its services and a basic seed fund. A dilution at the seed stage will only magnify the possibilities of higher dilution in the subsequent funding rounds.
  • Relocation. Most accelerator programs are on-site. The core startup team has to relocate to the accelerator location and live around the premises for 2 – 3 months.

Thus there are many aspects to a startup accelerator program. If approached with sufficient preparation, the pros might outweigh the cons. As a startup founder, you cannot deny the gravity and timing of investments. Startup accelerators provide access to just that and much more. Then how should you approach this? What is the right time to consider an accelerator program?

When should I choose a startup accelerator program?

When you are ready. As a founder, make sure to ask yourself if you and the company are ready for an accelerator program. It is a myth that an accelerator guarantees success. As if it was a formula to become a unicorn overnight. In fact, it is the other way round. Accelerators need you to be at your best. Else it is a wasted opportunity. These programs are highly competitive with an acceptance rate of 1 – 3% only. So make sure you make the best of it. Here are some pointers to determine your ‘readiness’ for an accelerator program. You are ready when:

  • Startup has reached the early-seed or seed stage
  • Startup has a co-founder
  • Startup has an MVP
  • Startup has sufficient market research data to establish the viability of the prototype
  • Startup has a business plan
  • Startup ready for a growth spurt
  • Startup has a core team of experts who can learn and deliver under high pressure, portray leadership skills
  • Startup team  can commit 100% time to the accelerator program beyond managing the company on a day-to-day basis
  • Startup ready to part with 5 – 10% equity in exchange for the deliverables of the accelerator program
  • Startup ready to part with an additional 10 – 20% equity for the seed round on Demo Day
  • Startup core team ready to relocate to accelerator site
  • Startup has all legal documents in place
  • Startup has a minimal error process to update and maintain cap tables

Once you have checked all these boxes, you can rest assured that an accelerator program will work in your favor. But this is only one side of the story. What about the merit of an accelerator program? If you have worked so hard to create a credible company, shouldn’t you check the potential of the ones choosing you? Will they do justice to your time and efforts? Here is how you can approach this situation.

  • Do a thorough background check of the accelerator program. Check with their alumni and market feedback
  • Do their goals align with your company? With 5 – 10% equity they will become your shareholder. Ensure you are allowing management access to the right people
  • Check their curriculum. It should include courses that strengthen your fundamentals in startup operations such as legal, business model, finance model, equity management, due diligence, and the likes
  • Check how they monitor progress and performance. Do these metrics suit your business?
  • Visit their premises and check facilities
  • Verify their engagement levels. Ensure their goals are pragmatic
  • Verify mentor profiles. Ensure they are seasoned entrepreneurs with real industry experience
  • Verify investor network. Research their Demo Days. Who participates? What is their credibility? Transparency in financial transactions, etc.
  • What happens after you pass out of the program? How is the alumni support?

Popular startup accelerators 

There are more than 100 startup accelerators and the number keeps growing by the day. To get you started, we have compiled a list of the top 10 based on the amount of seed capital raised:

Y Combinator

Duration: 3 months

Headquarter: Mountain View, California

Companies launched: 1801

Seed fund: $39,839,695,289

Track record: 4000+ investments, 354 exits

Top brands:

Stripe, Airbnb, Cruise, Automation, DoorDash, Coinbase, Instacart, Dropbox, Twitch, Reddit

Techstars

Duration: 3 months

Headquarter: Boulder, Colorado

Companies launched: 1336

Seed fund: $8,664,791,204

Track record: 3,300+ investments, 310 exits

Top brands: Bench, Digital Ocean, FullContact, SendGrid, and Zagster

500 Startups

Duration: 4 months

Headquarter: San Francisco, California

Companies launched: 686

Seed fund: $3,195,638,016

Track record: 2,600+ investments, 288 exits

Top brands: Twilio, Credit Karma, SendGrid, Grab, GitLab, Bukalapak, Canva, Udemy, TalkDesk, Intercom, Ipsy, MakerBot, Wildfire, and Viki

AngelPad

Duration: 3 months

Headquarter: San Francisco, California

Companies launched: 153

Seed fund: $2,234,261,983

Track record: 175+ investments, 36 exits

Top brands:

Buffer, CoverHound, MoPub, Postmates, Astrid, Drone Deploy, Ribbon, Pipedrive, Rolepoint, and Vungle.

Seed Camp

Duration: Customized to suit shortlisted candidates

Headquarter: Shoreditch, London

Companies launched: 118

Seed fund: $1,124,789,400

Track record: 400+ investments, 43 exits

Top brands: UiPath, TransferWise, Revolut, Hopin, Wefox, Grover, Viz.ai, Sorare, and Trestle

The Alchemist Accelerator

Duration: 6 months

Headquarter: San Francisco, California

Companies launched: 344

Seed fund: $1,036,045,522

Track record: 540+ investments, 37 exits

Top brands: LaunchDarkly, Rigetti Quantum Computing, mPharma, Matternet, and Mightyhive

DreamIT Ventures

Duration: In 4 phases, distributed over a year

Headquarter: Greater New York Area, East Coast, and Northeastern US

Companies launched: 197

Seed fund: $1,032,491,096

Track record: 370+ investments, 38 exits

Top brands: LevelUp, Trendkite, SeatGeek, HouseParty, Adaptly, Wellth, Biomeme, Tissue Analytics, Redox, Eko Devices, Raxar, Cylera, and Elevate

Amplify. LA

Duration: 4 months

Headquarter: Venice, California

Companies launched: 36

Seed fund: $689,256,760

Track record: 140+ investments, 17 exits

Top brands: Tapcart, Candid Wholesale, Carpay, Lantern, Abstract, Strike Graph, Return logic, Good fair, Stack Commerce, RadPad, Bitium, Mover, and Mapsense.

Mucker Lab

Duration: Phased over 1 yr

Headquarter: Santa Monica, California

Companies launched: 27

Seed fund: $628,025,626

Track record: 9 investments, 3 diversity investments

Top brands: Alcatraz, Artful, Bambee, BloomNation, Butter, Citruslabs, Cloverleaf, Emailage, GoFor, Hologram, Honey, Leaselock, Papaya, ShipHawk, TrunkClub, and Workfast.

FounderFuel

Duration: 4 months

Headquarter: Canada

Companies launched: 69

Seed fund: $596,485,083

Track record: 94 investments, 13 exits

Top brands: Sonder, Transit, Mejuri, Bus.com, Unsplash, XpertSea, LoginRadius, BenchSci, and Ready Education

Conclusion

Since the launch of Y Combinator in 2005, startup accelerators have become a trend. To nurture and launch startups for a small percentage of ownership in their companies has become a profitable investment strategy. They promise higher returns when compared to traditional investment instruments. Hosting a startup accelerator program and graduating out of one is a symbol of market leadership today. As a startup founder make sure to weigh all the pros and cons before embarking on this journey.

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Pros And Cons Of Cashflow Finance

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Pros And Cons Of Cashflow Finance

Cashflow financing is a type of business loan that you can use to cover your cash needs before they happen. Unlike traditional loans, it does not have to be repaid until after the event has already happened. This can help small businesses stay afloat in tough times when they are waiting for their invoices to get paid. However, this form of borrowing also comes with some major disadvantages that should be considered before choosing this option over more conventional methods. In this article, we will explore both benefits and drawbacks so you can make an informed decision about whether or not cashflow financing is right for your company.

What is Cashflow Finance and how does it work 

Cashflow finance is a type of lending where you borrow money, but instead of the lender receiving the interest payments and finally repaying the loan, you allow them to collect their share as you make your monthly payments.

What this means is that the person who has money available can give it up in exchange for getting a cut for each payment that they receive rather than having to wait until they get all their money back at one time. The person receiving cashflow financing can use their credit freely throughout this process and doesn’t need to worry about paying interest along with making repayments on top of everything else because those are being automatically deducted from each monthly payment so he/she only needs to pay off what’s been borrowed.

Advantages of cashflow finance 

Increased flexibility in the capital structure – because investments are made when required, rather than having all funds tied up in one project.

Less need for external financing sources. 

Loan contracts are usually short-term so there is no prearranged commitment to any single lender or investor over a period of many years. 

Ease of access to capital compared with bank borrowing or public offerings – since they can be done quickly and without any major commitments. 

Potentially lower cost than debt financing because interest payments and redemption fees do not exist on these types of securities like interest and penalties would exist with bank loans and bonds (interest income still exists). 

Disadvantages of cashflow finance

Too much debt can impede growth and limit the firm’s investment opportunities.

New share issues (if needed, to raise equity) may incur significant costs and dilute existing stakeholder’s control.

Interest payments on borrowing may be greater than interest received on loans, mortgages, or deposits.

Greater chance of bankruptcy if repayments exceed earnings, which can happen when production cannot meet demand or when employment levels fall dramatically (e.g., due to economic downturns).

Why should you consider using cash flow finance for your business needs

Cash flow financing allows you to manage cash on an ongoing basis, rather than borrowing money or investing capital in inventory. This is a more flexible form of financing that is adjusted easily based on the natural flow of your business cycle, rather than being tied to staged billing cycles.

Using this kind of financial strategy allows you to control cash inflow and outflow efficiently, providing higher liquidity during spikes so your business can adapt quickly instead of paying high interest rates or waiting for credit checks. This way, your business stays more responsive and agile with fewer risks associated with missed deadlines or unforeseen opportunities.

How to get the best out of Cashflow Finance

When applying for a loan at cashflow finance company, it is important to be very specific about the funds you will use and how exactly you plan on using them. For example, if your plan includes paying down your debts or consolidating other loans in order to pay off this loan, it is important that the money be reimbursed by someone else and not come out of your salary because these latter means can often result in high interest rates and heavy payments. The key to successful loans with low interest rates for repayment is taking into account all variables when calculating risk factors such as employment stability, profession type (High Income Earning), etc. 

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