Burger chain Shake Shack. Ruth’s Hospitality Group, the owner of the famous Ruth’s Chris Steak House. Ashford Hospitality Trust, an investor in upscale communities. What do these disparate companies have in common? They’re all publicly-traded firms with revenues over $300 million — and they all garnered (negative) headlines for gobbling up most of the forgivable loans under the Payment Protection Program (PPP). This left little room at the table for smaller companies, mostly those with fewer than 500 employees, that truly needed federal funds to help them survive the devastation of a raging pandemic.

But change came quickly.

Backlash from the general public, politicians and small business proponents was swift and effective. In subsequent phases of the program, Congress and the Small Business Administration (SBA) made changes in PPP to try to increase lending to the smallest businesses in underserved locations, mostly those with fewer than 10 employees. Those changes paid dividends, according to a recent report by the Government Accountability Office (GAO). Designed to summarize the effects of the $814 billion program, which ended in June, the GAO reported in September that by opening the PPP program to nonbank organizations like CDFIs and Minority Depository Institutions (MDI), the SBA indeed eventually brought in thousands of underserved companies and individuals into the program. Significantly, in May, the SBA set aside $10 billion for businesses that applied through the CDFI program as part of phase 2.

According to the report, by the time PPP closed in June, the SBA awarded loans to minority and women-owned businesses in traditionally underserved counties “proportional to their representation in the overall small business community” and in some cases exceeded it. (The SBA defined a small business as one with fewer than 10 employees.) For example, businesses in high-minority counties received 50% of all loans above their representation of 47% of all small businesses nationwide. On the flip side, loans to businesses with fewer than 10 employees fell below their share of small businesses nationwide throughout the program and businesses on land owned by Native Americans garnered just 1% of all loans.

Overall, though, “the SBA was grateful an independent organization like GAO came out and said this program did evolve and … did have some impact on the ground level,” says John Pendleton, a director of financial markets and community investment at GAO.

The GAO was tasked under the Coronavirus Aid, Relief and Economic Security Act (CARES) to monitor the federal government’s response to the COVID-19 pandemic. This study is the latest in a series of reports analyzing how well PPP performed in meeting its goal of helping small businesses get low-interest loans. Those businesses included self-employed individuals, minorities, women and veterans. The 48-page report mostly underscored and confirmed much of the reporting on the program since it started in March 2020 under CARES. That is of a much-ballyhooed program that failed to meet its goal of protecting the economic livelihood of the most vulnerable early on but found its footing in later stages.

The study found that the initial funding for PPP was exhausted in the first 14 days of the program, and that 42% of phase 1 loans went to larger businesses of 10 to 499 employees. Those businesses accounted for only 4% of all U.S. small businesses, however. Those bigger businesses got loans because they already had established relationships with traditional banks, which doled out most of the loans in phase 1. Most underserved and small minority-owned companies don’t enjoy such relationships with bigger financial institutions.

Out of the loop, smaller businesses were less aware of the PPP program, explaining further their exclusion from phase 1 funding. Many applied later and faced longer processing times.

Fortunately, that wasn’t the case for Byron Darden, whose application for a PPP loan closed within a month last April. Guided by advisors including those at the CDFI Harlem Entrepreneurial Fund, Darden, a sole proprietor, scored a rather hefty PPP loan of close to $20,000 to create a digital marketing platform for his keynote speaking firm, Triple Axel Executive Coaching.

“The loan allowed me to get back on my feet,” says Darden, a former ice-skating coach.

Other key findings of the study:

• In the initial phase, businesses in rural counties received 19% of the loans though they represent just 13% of all small businesses.

• Not surprisingly, businesses in the hardest-hit sectors such as food services and retailing got 40% of early phase 1 loans.

• In the second phase, the SBA opened the process by admitting more than 600 new lenders, including financial institutions that are not banks (these are classified as institutions that don’t accept deposits).

• By the third phase, CDFIs and MDIs captured 24% of loans versus just 4% in phase 1. They made a whopping 97% of the loans issued by new lenders in the last two phases of the program.

• The share of loans to counties with large shares of women-owned businesses doubled to 18% from 9% from the initial phase to phase 2. Loans to minority-owned businesses increased to 50% in phase 2 from 36% in phase 1.

Minority-business proponents like Lenwood V. Long think the findings of the report illustrated CDFIs’ main function of meeting small- and minority businesses where they are, despite the initial stumbles. Long is president and chief executive officer of the Florida-based African American Alliance of CDFI CEOs, which along with organizations such as the NAACP, advocated for greater participation of minority businesses in PPP. Twelve companies associated with his alliance participated in PPP, loaning out almost $5 billion of funding across phases 1 and 2.

PPP showed, among other things, that “CDFIs have the capacity to meet the demands of serving (those) communities,” Long says. “It showed that CDFIs are important.”

This story is part of our series, CDFI Futures, which explores the community development finance industry through the lenses of equity, public policy and inclusive community development. The series is generously supported by Partners for the Common Good. Sign up for PCG’s CapNexus newsletter at capnexus.org. Editor’s note: We’ve corrected the name of Ruth’s Chris Steak House.