Founders First Closed $18.6 Million Change Catalyst Fund
The San Diego firm scales non-dilutive capital for service-based small businesses in underinvested communities.
Updated on Oct. 8, 2026 in Startups
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San Diego-based Founders First has closed its second Change Catalyst Fund at $18.6 million. This investment pool provides private credit and revenue-based financing to small businesses.
Why it matters
The fund addresses a significant capital gap for small businesses needing to refinance high-cost merchant cash advance (MCA) debt. This demand has surged since 2025, when the U.S. Small Business Administration prohibited using its loans for such refinancing.
The firm has deployed over $23 million in capital to date, with loan volume increasing 46% year-over-year. More than 61% of these loans are specifically utilized for refinancing merchant cash advance debt.
The players
Founders First
A San Diego-based firm specializing in non-dilutive, revenue-based financing for service-based small businesses.
Wells Fargo Foundation
A corporate philanthropic arm that provides capital for community and small business development initiatives.
Community Reinvestment Fund USA
A national non-profit organization focused on providing capital and expertise to support community economic development.
The details
Founders First provides non-dilutive financing—capital that does not require giving up equity or ownership in the business—tailored for service-based companies. The fund utilizes a tiered capital structure, incorporating catalytic and first-loss capital—a mechanism where initial investors absorb the first portion of potential losses—to manage risk while deploying credit to businesses in underinvested communities.
Timeline
2025: The U.S. Small Business Administration prohibited using its loans to refinance merchant cash advance debt.
April 2026: Founders First announced an initial $12 million close for the fund.
October 2026: The fund officially closed with a total of $18.6 million.
The Tech Race
This fund represents a departure from traditional lending by directly targeting the debt burden created by merchant cash advances. It follows the regulatory constraints established by the SBA's 2025 policy shift regarding small business debt refinancing.
Small business owners in underinvested communities can access this private credit to restructure high-cost debt without diluting their equity. The availability of this capital depends on meeting the firm's eligibility criteria for service-based small businesses.
The takeaway
The closure of this fund highlights the growing role of private, non-dilutive credit in filling gaps left by traditional SBA lending. Observers should track the firm's total capital deployment, which currently exceeds $23 million, to gauge the long-term sustainability of this financing model.
Further reading
For broader trends in the local ecosystem, visit the Startups section.
Source note: This article includes information reported by ImpactAlpha.
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