Black-owned businesses face a “huge burden” getting the necessary funding to keep their businesses afloat during the coronavirus crisis, according to advocates for minority businesses.

Congress allocated $349bn in its $2.2tn stimulus package, and another $484bn when funds initially ran out, dedicated to loans for businesses with 500 employees or fewer. Given through a lending program called the paycheck protection program, the loans are forgiven if a business uses at least 75% of their loans for their employees’ payroll. The other 25% can be used only for rent, mortgage interest or utilities.

“A lot of the money that was set aside for small businesses did not end up in the businesses that we own and operate,” said Ron Busby, president of US Black Chambers, a not-for-profit advocacy group for black business owners. “When this piece of legislation came out and it did not address an equitable way for black and brown business owners to get access to capital, it is a huge burden for us.”

As black Americans face disproportionately harsh economic and health consequences due to the Covid-19 crisis, advocates say black business owners have been having difficulty getting access to the funds because many black-owned businesses do not have relationships with established banks. As business owners rushed to apply for loans, which were given on a first-come, first-serve basis, some banks said they were giving priority to existing clients.

Black business owners can face discriminatory hurdles when approaching traditional banks for a business loan that prevents them from building credit and building a relationship with a bank.

Research has shown that even with the same credit history, black business owners seeking small business loans receive less friendly treatment and information about a bank’s services compared with their white counterparts. In 2017, a Federal Reserve study found that, though black business owners apply for small business loans at a higher rate than white business owners, the approval rate for white entrepreneurs is 19% higher than the approval rate for black entrepreneurs.

For black business owners, not getting the loans they need can start a vicious cycle where they continuously struggle to pay any credit they take out. “You end up either suffering through the process trying to figure out how to pay, [or] you’re not able to pay in full, which means your credit is damaged because you’re not paying on time,” Busby said. “We never get out of that hole.”

Many minority business owners have much stronger relationships with community development financial institutions and minority depository institutions that are smaller, but friendlier toward those who are often turned away by traditional banks. These types of banks experienced more technical difficulties in setting up loan applications for the paycheck protection program. As a result, Congress allocated $30bn out of the second wave of funding to be set aside specifically for these community financial institutions.

Kita Holmes, the owner of 5 Star Property Management, said that she has had difficulty getting a loan for her Maryland-based property management company that has seen a decline in new renters and property investors since the crisis started.

Though she applied for a loan during the program’s first round of funding through her bank, she never received a response to her application. The only line of credit she had was closed, and she is worried about the future of her business.

“I have saved, but if this market doesn’t open up and things don’t change pretty quickly … I don’t know what will happen. I will probably look for work,” Holmes said. “I don’t want to give up, but it’s very hard times for a small black business owner.”

Because the payroll protection program stipulates that a bulk of the loan must be used for payroll expenses in order to be forgiven, many black business owners could be excluded from forgiveness since a majority do not have employees on payroll.

Only about 120,000 black-owned businesses, out of the 2.7m in the US, have employees on payroll, Busby said. Because the average annual revenue of a black-owned business is $75,000, “it’s hard to have anyone else work for you when you’re only bringing in enough revenue to pay expenses and keep yourself employed”, he added.