Fintech Startup of the Week: Meratas Powers Income Sharing Agreements (ISA)

Interview with Meratas founder Darius Gold by Jason Calacanis (62 minutes; 25 Nov 2020)

Despite our current struggles, there are so many good things happening that will change the way we live. One promising new area is the income-sharing agreement (ISA) used to fund education and training. It creates a financial partnership between schools and their students with both sides betting on a good financial outcome.

ISAs work in a broad array of programs from 4-year degrees to 6-week boot camps. But ISAs work especially well where a relatively short curriculum, think months instead of years, can lead to a dramatic salary boost. For example, specialized health care certificates, sales courses, trade schools, and so forth. And those programs, don’t usually offer government-backed loans, so financial aid is particularly tricky.

While the benefit of an ISA is pretty straightforward, building and servicing one is not. Applicants must be evaluated on both their aptitude for the program AND their likelihood of landing and holding a well-paying job AND living up to the terms of the ISA. That last part sound pretty familiar to bankers, it’s basically an unsecured loan.

How the ISA works:

The student applies for a program(s) they believe will enhance their job prospects
The school evaluates the student’s fit based on background and aptitude
The school evaluates the student’s current and past financial situation, their job prospects, and their expected willingness to repay the ISA
The student graduates, starts a job, and begins repayments (assuming their job surpasses the pre-set minimum salary)

Since schools do not typically have the skill set or tools to underwrite the loan or repayment process. Enter Meratas, an innovative fintech providing ISAs as a Service to educational and training companies. Meratas is the brainchild of Darius Gold, a sales-training program founder who soon realized the need for an ISA specialist when he was setting up one at PreHired.io. Prehired provides sales training for newcomers wishing to enter the field. It’s graduates land jobs averaging $73k annually. That allows them to easily afford to pay back PreHired AFTER they get a job. But many cannot afford the tuition beforehand.

So Gold left the day-to-day operations at Prehired and founded Meratas to handle ISA mechanics for other companies. Meratas handles:

Underwriting the applications (credit checks, employment verification, etc)
Contracting with the student upon acceptance
Communicating with the student about their obligations before and after graduation
Following the student after graduation to ensure their cooperation with the terms
Processing payments for the life of the agreement
Collecting from students that don’t meet repayment obligations

Meratas does NOT currently finance tuition itself so they are not on the hook for non-payment. Schools take on that risk, providing the training program free of charge and then receiving payment afterward, typically after a job in the specific field is found. See a 6-min demo of the application experience here.