Founders First Closed $18.6 Million Capital Fund
The San Diego-based firm will deploy funds to help small businesses refinance high-cost merchant cash advance debt.
Updated on Oct. 8, 2026 in Startups
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San Diego firm Founders First closed its second Change Catalyst Fund at $18.6 million. The capital will support revenue-based financing for service-based small businesses in underinvested communities.
Why it matters
The fund addresses a critical financing gap for small businesses looking to refinance expensive merchant cash advance debt. This demand has intensified since the U.S. Small Business Administration restricted the use of its loans for debt refinancing in 2025.
Founders First has now deployed more than $23 million in capital, with loan volume rising 46% year-over-year. Merchant cash advance refinancing currently accounts for more than 61% of the firm's total loan portfolio.
The players
Founders First
A San Diego-based firm providing non-dilutive revenue-based financing and private credit to service-based small businesses in underinvested communities.
Wells Fargo Foundation
A philanthropic entity that provides capital and support to organizations focused on small business development and financial inclusion.
Community Reinvestment Fund USA
A non-profit organization that serves as an institutional investor to increase capital access for underserved small business communities.
The details
The firm operates by providing non-dilutive, revenue-based financing and private credit to businesses that often struggle to access traditional bank lending. Its fund utilizes a tiered capital structure, incorporating catalytic and first-loss capital to balance risk and returns. By prioritizing the refinancing of merchant cash advances, the firm helps operators replace high-interest, short-term debt obligations with more sustainable financing structures.
Timeline
2025: The U.S. Small Business Administration prohibited using its loans for merchant cash advance refinancing.
April 2026: Founders First announced a $12 million first close for the fund.
October 2026: Founders First officially closed the fund at $18.6 million.
Market Landscape
This move follows the 2025 U.S. Small Business Administration rule prohibiting merchant cash advance refinancing, which restricted traditional capital pathways for many businesses. Private credit providers like Founders First are increasingly stepping in to fill this regulatory-driven gap.
Operators currently servicing merchant cash advance debt should evaluate whether alternative revenue-based financing structures offer better long-term cash flow management. Monitor the availability of private credit providers, as institutional interest from major foundations signals a broader trend in filling gaps left by traditional lenders.
The takeaway
The firm's capital deployment highlights a growing reliance on private credit to manage high-interest commercial debt. Owners should track their 'cost of capital' metric closely and explore non-dilutive refinancing options before renewal windows for existing high-cost merchant advances open.
Further reading
For more on the current financing climate, visit our Startups section.
Source note: This article includes information reported by ImpactAlpha.
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