Learn about using loans to finance an EB-5 investment
Understanding the legal funding options for your EB-5 investment will allow you to appropriately allocate funds and plan for the investment ahead of time. USCIS has recently changed course on accepting loans, so it’s important to stay up to date on the latest rulings and developments.
As we have seen previously, the EB-5 Program allows immigrant investors to obtain a Green Card to live and work with their families in the country, after a capital investment of between 800,000 and 1,000,000 USD. Amount that is returned once the project chosen to enter the program is finished.
But when planning an EB-5 investment, there are many factors to consider. One of the most important is how to finance your investment. A question that frequently arises is whether a loan can be a source of funds for the investment of an EB-5 investor, and we will give you the answer below.
Loans to EB-5 investors have been a controversial topic in the industry. The US government has always taken the position that investment funds should be free of any encumbrances. However, USCIS has recently changed course regarding loan acceptance, allowing certain types of loans to be accepted by an EB-5 classification.
Currently, the EB-5 Program does allow interested parties to invest in the United States by borrowing funds from any legal source. In other words, USCIS has long recognized that foreign investors may need help financing their investment in the United States.
In summary, today there are three avenues through which investors can help finance their EB-5 investments: bank loans, cashier’s checks, and personal loans. Each option has its pros and cons, and each should be evaluated in light of its purpose within your overall investment plan.
Legal Funding for the EB-5 Program
If you plan to invest in the United States through the Immigrant Investor Program, legal financing options allow you to put your money where it can grow, while complying with United States Citizenship and Immigration Services (USCIS) regulations.
Legal funding basically refers to when a foreign investor borrows money as part of their EB-5 investment (you typically need to borrow at least $500,000 to be eligible). The funds they receive go toward the purchase or development of a project that then creates jobs for American workers and ultimately meets their goal.
USCIS has traditionally accepted non-recourse loans for EB-5 purposes if the borrower was not personally responsible for repayment. In December 2016, however, USCIS released guidance stating that its policy had changed from the previous administration and that USCIS would no longer accept non-recourse loans where the borrower was personally responsible for repayment.
Requirements for the use of an EB-5 loan
USCIS allows loans to qualify as legal capital contributions for EB-5 investments, but strict criteria must be followed.
Legal Source of Funds
As with a standard EB-5 investment, the funds obtained through your loan must come from a legal funding source. Due diligence must be carried out and it must be well documented how the lender legally obtained funds, tracing from the lender to the borrower (EB-5 investor) and ultimately to the project to be developed.
Personally Responsible Investor
You, as the EB-5 investor, must be the established borrower of the loan with sole responsibility for repayment. No assets related to the EB-5 project itself can be used as collateral.
Secured and Unsecured Loans
In October 2020, a three-judge panel finally ruled in favor of EB-5 investors after a 5-year long fight with USCIS, allowing the use of secured and unsecured loans for EB-5 investments. USCIS can no longer deny EB-5 petitions based on how the loan was acquired.
“As far as the company is concerned, it doesn’t matter if or how the investor’s loan was guaranteed; it can distribute the cash in any way and does not face any exposure if the investor defaults on any obligation to a third-party lender.” – Judge Gregory G. Katsas.
USCIS allows EB-5 funds to be derived from secured and unsecured loans as long as assets involving the EB-5 project are not used as collateral. Clients around the world have unique financial circumstances, and Dynaxe Capital can help with unique lending strategies for your EB-5 investment.
Investing in BAI Capital is investing in the United States
With a presence in the real estate sector in the states of Florida, Texas and New York, BAI Capital specializes in generating value from the acquisition of land to the development of mixed-use projects, such as residences for the elderly, student residences, multifamily buildings. for rentals and mixed use, including condos and retail.
Our mission is to safeguard the capital of the partners and the own capital under the minimum risk exposure. With a safe development and going through all the stages: Land purchase, adjustment of urban zoning, commercial vision in architectural development and management of building permits. Then, we take charge of the capitalization, construction and exit with return of the capital and profits to the partners.
In this way, we guarantee fixed and stable returns for your client portfolio. In addition to having a confidential work protocol with encrypted web forms. Use of protected personal data and private meetings with our agents throughout Latin America.
You now know all about using loans to finance an EB-5 investment. If you are looking to protect your capital from inflation through investments with returns in dollars, or invest in projects that qualify for the EB-5 investor visa to get a Green Card, complete our form and an agent will contact you.
