By Kate Kalmykov and Jennifer Hermansky
While USCIS allows investors to use loan proceeds for EB-5 investment, to do so successfully attorneys and immigrant investors must be aware of recent trends in USCIS adjudications and requests for evidence. The following six tips, highlight recent requirements that have become apparent through EB-5 practice:
- Term of the Loan. USCIS requests seem to carefully examine the term of a loan and have a preference for a loan that is at least 1-2 years, with the option of extending the loan beyond that if necessary. It is an acceptable strategy for the investor to mortgage the property, and potentially sell the property to pay off the loan at the end of the term when the investor moves to the U.S. Loan contracts must be carefully reviewed by counsel to ensure that these requirements are met.
- Interest Rate. The loan or short term credit agreement should list the interest rate on the loan. If there is no interest rate specified, USCIS may treat the loan as a gift, which may be problematic for the case. This is an issue that should be vetted at the outset by the attorney preparing the case.
- Collateral for the Loan. The loan must be fully collateralized by the investor’s personal assets. Thus, the loan agreement or any short term credit agreement should also correspond with a mortgage agreement that secures the loan or short term credit agreement with the investor’s properties. Each property that is collateralizing the loan should be listed on the corresponding mortgage agreement.
- Appraisal for the Loan. There should be a formal appraisal done of any property that is securing the loan. Simply having the “minutes of an asset valuation meeting” may be insufficient for USCIS. USCIS will want to know how the properties were valued and when they were valued. The value of the properties should meet or exceed the amount of the loan.
- Documentation of Ownership. The I-526 submission must document fully how the investor owns the properties that are securing the loan. Although an unspoken rule, if the properties were purchased less than 7 years ago, the I-526 petition should explain how the investor purchased the properties that are being mortgaged as USCIS has repeatedly requested this information. This includes sourcing any funds that were used in their purchase.
- Use Rights vs. Ownership. If the investor is mortgaging something that they only have a land use right to and that they do not actually own, the USCIS will need the attorney and investor to explain how and why the bank accepted that as mortgaged collateral.