Founders First Closed $18.6 Million Catalyst Fund

The San Diego-based firm secured new funding to support service-based small businesses in underinvested communities.

Updated on Oct. 8, 2026 in Startups

Founders First Closed $18.6 Million Catalyst Fund

Live Poll

Would you choose revenue-based financing over traditional bank loans for your small business?

Founders First has successfully closed its second Change Catalyst Fund, raising a total of $18.6 million. The firm provides critical private credit and non-dilutive financing to small businesses facing challenges with high-cost debt.

Why it matters

Many small businesses seek this financing to refinance merchant cash advance debt, a practice that has grown significantly in volume. This fund provides a specialized alternative for entrepreneurs who often lack access to traditional capital.

The firm has deployed more than $23 million in capital to date, with total loan volume rising 46% year-over-year. Currently, more than 61% of all loans issued by the firm are dedicated to refinancing merchant cash advance debt.

The players

Founders First

This San Diego-based firm provides private credit and non-dilutive revenue-based financing specifically to service-based small businesses.

Wells Fargo Foundation

This organization is one of the new investors that contributed to the second Change Catalyst Fund.

Community Reinvestment Fund USA

This non-profit organization serves as a new investor providing capital to support the firm's lending activities.

US Small Business Administration

This federal agency sets the standards and regulations for small business lending across the United States.

The details

The fund utilizes a capital structure that incorporates catalytic and first-loss capital to balance varying levels of risk and return for investors. This structure allows the organization to serve businesses in underinvested communities that are often overlooked by conventional banking institutions.

In 2025, the US Small Business Administration prohibited the use of its loans for merchant cash advance refinancing.
Founders First held a $12 million first close for the fund in April 2026.
The firm officially closed its second fund at $18.6 million in October 2026.

Market Landscape

Founders First is filling a critical gap in the credit market following the US Small Business Administration's 2025 prohibition on merchant cash advance debt refinancing. By providing specialized private credit, the firm is positioning itself to capture significant demand from businesses seeking to escape predatory high-cost debt.

Small business owners struggling with high-cost debt may now have access to alternative refinancing options that were previously unavailable. These services can help stabilize monthly cash flow and provide a path away from high-interest merchant cash advances.

The takeaway

The firm's ability to raise capital during a period of shifting federal lending regulations highlights a growing appetite for private credit in underserved markets. Entrepreneurs should carefully evaluate the terms of non-dilutive financing against traditional bank loans to ensure long-term debt sustainability.