If you’re considering investing in the United States through the EB-5 program, you’re probably wondering how you’re going to fund this investment? There is no doubt that the EB-5 program, set up by the U.S. Congress in 1990, is an excellent way to obtain your green card and secure United States citizenship, but it also requires a significant capital investment.
One of the ways in which you can fund your EB-5 investment is through a loan. This loan can come from a family member or friend, a banking institution, in the form of an unsecured loan, or any other legitimate source. The main requirement of U.S. Citizenship and Immigration Services (USCIS) is that you are able to track the source of the funds that make up your loan.
In this article, we will take a look at the role loans can play when it comes to EB-5 financing, and uncover how you can use one as funding.
How Does an EB-5 Loan Work?
When you’re considering an EB-5 investment, you have several options for securing your funds. You can get a loan from a bank, a principal borrower, a lending institution, a financial institution, or even from friends or family. Essentially, the loan can come from any legal source. It is crucial, however, to remember that EB-5 regulations require that the funds be at risk (an ‘At Risk’ investment), which means the loan cannot be secured by the EB-5 investment itself.
Key Point: What Is an ‘At Risk’ Investment
In the context of the EB-5 Program, an ‘at risk’ investment refers to the requirement that the investor’s funds must be exposed to a degree of financial risk. The idea is that the investment should have the potential for gain, but also the risk of loss. Simply put, it’s not a guaranteed return.
Here are some common ways that immigrant investors source their loan proceeds:
- Savings: You may use personal savings as the primary source of investment funds.
- Gifts: Funds can be gifted to you by a friend or family member, as long as you can prove that the gift was lawfully obtained.
- Sale of property: The proceeds from the sale of real estate or other property can be used as investment funds.
- Loans: You can use loans as a source of funds, provided the loan is secured by your personal assets and not the assets of the enterprise being invested in.
One of the most common sources of capital for EB-5 investors is asset-backed loans. While it is perfectly acceptable to use borrowed funds to make an EB-5 investment, loans can complicate the process of proving the investment funds were legally obtained.
For example, if an investor borrows from a bank and uses an asset as collateral, the investor must provide evidence that they are the legal owner of the asset and that they used funds obtained legally in order to buy the asset. This becomes even more complicated when an investor takes a loan from an individual.
In this case, the investor has to prove that they own the asset they have as collateral and used lawfully obtained funds to buy it, and the lender must provide evidence that the loaned funds come from legal sources.
How Does the Process Work When Using a Loan to Fund Your EB-5 Investment?
When using a loan to finance your EB-5 investment you need to follow a specific process, which ensures you’re able to prove that your funds come from a legal and legitimate source.
First, you will need to secure a loan from your chosen source. Once approved and when you have received the funds, you can then invest the money into the EB-5 enterprise.
Most importantly, while you are securing your loan, you will need to maintain a detailed paper trail of all your transactions. You will also need to provide evidence of the loan agreement, the transfer of funds, and the investment into the EB-5 enterprise. This is to demonstrate to USCIS that the funds were obtained lawfully and are at risk as per EB-5 guidelines.
Points to Consider When Using a Loan for Your EB-5 Investment
If you’re considering investing in the EB-5 Immigrant Investor Program, it’s essential to understand the borrowing terms associated with EB-5 loans.
Here are a few points that you need to consider when thinking about using a loan for your EB-5 investment:
1. Loan amount
The minimum investment required for the EB-5 Program is $800,000 if investing in a targeted employment area (TEA) and $1,050,000 for non-TEA investments. In both cases, you will need to invest in a regional center that has been approved by USCIS. While you can borrow this capital, you will need to ensure that the loan is secured by your personal assets.
Key Point: What Is a Targeted Employment Area and a Regional Center?
A targeted employment area (TEA) is a specific geographic location designated by the U.S. government for certain economic development purposes, such as providing tax incentives for investors or companies that are located in these areas.
TEAs are typically designated by the U.S. Department of Treasury’s Community Development Financial Institutions Fund (CDFI Fund) and are used to encourage economic development and job creation in areas that are economically disadvantaged or underdeveloped.
Regional center designation is given to a specific geographic area in the United States that has been approved by USCIS to promote economic growth and job creation through the EB-5 Immigrant Investor Program. Regional centers are typically created by private entities such as economic development organizations or real estate developers, and are designed to pool investments from EB-5 investors into specific projects that will create jobs in the designated region.
2. Interest rates
Interest rates for loans can vary depending on the lender. EB-5 investors should use market-level rates for their loans.
3. Loan term
The term of the loan can significantly impact your monthly payments and total repayment amount. Usually, loans have terms that range from five to twenty years. It’s advisable to consider the term carefully to ensure it aligns with your financial plan.
4. Repayment options
Repayment options can also vary. Some loans may require monthly interest payments followed by a balloon payment of the principal at the end of the term. Others may allow for payments over the life of the loan. It’s critical to understand the repayment terms before you sign your loan agreement.
How EB-5 Investors Can Apply for a Loan
The process of applying for an EB-5 loan involves a series of steps. Let’s break it down for you:
Choose an investment
First, you need to select an EB-5 investment opportunity. This can be either a new commercial enterprise or a troubled business.
One example of a fantastic investment opportunity is EB5AN’s Twin Lakes EB-5 Development Project.
Situated close to Atlanta, Georgia, the Twin Lakes EB-5 Development Project has been structured to create an outstanding EB-5 investment opportunity for immigrant investors in a successful, well-considered new commercial enterprise.
Your investment capital will be used to generate employment through direct investment to uplift a rural community, which enables you to become a green card holder.
Invest the required amount
Next, you need to invest the necessary amount. To recap, this is $800,000 if the investment is made in a TEA.
Submit Form I-526
Once you’ve made the investment, you will need to submit Form I-526E to USCIS. This form proves that you have made the required investment and that this investment will create the necessary number of jobs.
Key Point: What Are the Job Creation Requirements for EB-5?
The goal of the EB-5 Program is to stimulate economic growth and job creation by attracting foreign investors to invest in new commercial enterprises in the United States. In general, the EB-5 Program requires that at least 10 full-time jobs be created for U.S. workers as a result of such an investment.
Wait for approval
After submitting Form I-526, you have to wait for approval. This can take several months.
Apply for a visa
Once your I-526E has been approved, you can apply for an EB-5 Visa.
Remember, the goal is to contribute to the US economy by creating jobs, and in return, you get the opportunity to live, work, and study in the United States.
If You Have Used a Loan to Fund an EB-5 investment, Can It Be Repaid Early?
When, as an EB-5 investor, you take out a loan, you become the owner of the loan amount. For EB-5 investments, USCIS requires that the investor “is the legal owner of the capital invested and has obtained the capital through lawful means,” as per the USCIS Policy Manual.
The early repayment of a loan used to fund an EB-5 investment will have no effect on the investor’s EB-5 Visa application.
So, if you have provided the necessary source-of-funds documentation to prove that you legally own and lawfully obtained the invested capital, the early repayment of loaned funds used for an EB-5 investment has no bearing on the rest of the EB-5 application process.
How to Plan Your Investment Funds – The Way Forward
Because of the importance and potential complexity of clearly setting out the source and path of EB-5 investment funds, investors should work with EB-5 professionals to prepare their source-of-funds documentation and to guide them through the EB-5 Visa application process.
The first step is to retain immigration counsel with an experienced EB-5 and immigration lawyer. A good EB-5 immigration attorney can answer any questions that arise during the years-long application process or provide referrals to financial and other experts in the EB-5 arena.
Our team of immigration attorneys and EB-5 specialists at EB5AN is highly qualified and experienced. We have the tools and knowledge to assist you in navigating the EB-5 investment journey with ease and confidence.
Book your free consultation with us today, and let’s help you secure your green card in the fastest possible time.
