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You may be familiar with income share agreements, or ISAs, as an alternative to student loans. But what about income share agreements for entrepreneurs?

An ISA is a financial agreement where a capital provider offers something of value (like cash or education) in . It’s a flexible form of capital designed for situations that traditional forms of financing aren鈥檛 built to handle.

At Chisos, our first innovation was to modify ISAs to fit the needs of entrepreneurs.聽We call it a Convertible Income Share Agreement, or CISA. It鈥檚 a hybrid ISA for entrepreneurs that combines:

• An income share agreement (ISA) with the founder; and
• A SAFE agreement that grants a small amount of equity in the startup.

With the CISA, we鈥檙e writing checks of $15,000 to $50,000 to idea- and early-stage founders.

In this article, I鈥檒l explain seven important pros of ISAs for founders, plus four cons.

7 pros of ISAs

1. An option when others don鈥檛 exist: Most banks won鈥檛 extend credit at the earliest stages of your business, and less than 2 percent of startups secure VC or angel investments. The few remaining options鈥攑ersonal savings, high-interest credit cards, or cash from wealthy connections鈥攁ren鈥檛 accessible to many founders. In this environment, the biggest benefit of ISAs for founders is that they’re available when other good options simply aren鈥檛.
2. Quick cash flow: With ISAs, you can get capital quickly. Most ISA providers offer a simple online application process.

Instead of spending months on pitch decks and VC meetings, entrepreneurs can apply for a Convertible Income Share Agreement . Once approved, they’ll get a check and can start building their business their way.

3. Different from traditional debt: Traditional debt usually looks at credit scores to define an interest rate. ISAs typically take a different approach to interest, and consider credit score in combination with other factors. Plus, the CISA doesn鈥檛 charge compound interest.聽Also unlike traditional bank loans, ISAs usually have flexible repayment terms. Chisos offers $0 payment periods for times of hardship when income is impacted.

3. Designed to fit your lifestyle: Most ISAs also include a salary floor; while your salary is below that threshold, you won鈥檛 make any payments. The CISA salary floor is $40,000.
4. Scales to fit: With an ISA, you’ll pay back a small percentage of your income (the Income Share Rate) to the ISA provider.聽When you鈥檙e earning less, you pay less back.
5. Alignment of interests: To be blunt, ISA providers make more money when their ISA recipients succeed financially, so they鈥檙e motivated to offer career support. Many ISAs, including ours, includes access to a community of founders, resources and advisers.
6. Retain your decision-making authority: When you accept VC funding, you also accept that investors have a say in how you launch and grow your startup. On the other hand, CISAs let you retain complete decision-making authority.

4 Cons of ISAs

While there are benefits to ISAs, there are also downsides:

• ISAs survive even if your career plans change, so you鈥檒l still need to make ISA payments if you decide to close up shop.
• ISAs are based on a percentage of your income. If you earn more during your repayment period, you鈥檒l pay more back. Most ISAs include a repayment cap, which is the maximum you鈥檒l pay. (Ours is 2x.)
• Every ISA is different. There鈥檚 no universal standard, so you鈥檒l need to make sure you understand the terms.
• There鈥檚 little regulation governing ISAs.

As a founder, you鈥檒l need to weigh the pros and cons of different financing options for your startup. Just remember: you have options. The CISA is one of them.

William Stringer is the co-founder and CEO of , a company that invests in ideas and the founders with potential to bring them to life. Through proprietary investment terms, the CISA, Chisos writes checks to idea- and early-stage entrepreneurs.聽

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