Foreign investors can use a loan to finance their EB-5 investment. However, the complexities of using debt when applying for this U.S. investor visa are inherent in the EB-5 visa program.
During a recent webinar hosted by EB5Investors.com, panelists Marjan Kasra from Lawmaks, Irina Rostova from EB-5 Support, and Kyle Walker from Green Card Fund provided valuable insights for potential EB-5 investors who are considering using a loan as part of their investment strategy.
They highlighted key guidelines, requirements, and best practices and explained the U.S. immigration authority’s position on using this financial mechanism to invest in an EB-5 project. The following key points will guide EB-5 investors in structuring loans, managing payments, and ensuring compliance with U.S. Citizenship and Immigration Services (USCIS) regulations to maximize the chances of a successful EB-5 investment using a loan.
EB-5 investors can make a partial investment using a loan or other funds if they demonstrate the source of funds for the remaining investment.
Irina Rostova: “It’s very important to distinguish between taking a loan and investing full cash into a project, which is considered a full investment and a partial investment. That’s when an investor doesn’t invest the full amount when they plan to file the I-526. They invest a partial amount and are in the process of investing the remainder. That usually means that they have signed an agreement with the regional center or the project issuer that they will provide the rest of the capital within a certain period. Partial investment is allowed under USCIS rules. You can make a partial investment, be contractually obligated to invest the remainder, and be able to file your I526E petition.”
She added: “Always keep in mind that the petitioner must be eligible for the benefits sought at the time they file the I526E petition. They still have to identify where the remainder of the funds will come from and provide source of funds documents in the petition. For example, if you have money locked up in a [Certificate of Deposit] CD that will expire in May 2025, but you want to make the EB-5 investment. Now, if you pull that money out of a CD, you will pay a penalty and lose all the interest your money has been earning in that account. You don’t have to do that. You can make the investment today with a partial investment, sign an agreement with the regional center for the remainder, and indicate to the USCIS that the funds to pay off this agreement with the regional center will come from these specific funds and provide a source of funds documents.”
EB-5 investors benefit from structuring loans with simplified documentation and repayment processes.
Irina Rostova: “What works very well for EB-5 purposes is to leave the loan unsecured with about 6 or 7 years in term and deferred, so it has a balloon payment at the end; there are no principal payments during the six or seven years, and whatever interest that’s being charged, it also has a deferred option so that the petitioner can repay the principal of the loan and the interest at the very end of that year six. I find that useful because the petitioner is taking a loan and then using that cash to invest in EB-5. If they’re making monthly payments on that loan, they must pay interest and principal. Then it’s extremely likely that USCIS will issue a [Request for Evidence] RFE and ask if these payments are being made on time and what the source and path of funds are for these payments. That is a lot of documentation that you must trace for these individual payments and their sources. Sometimes, whoever gave them the loan will want to receive those monthly payments. But if whoever is giving your client the loan does not care and is willing to wait six or seven years, then it’s nice to structure it as a balloon payment deferred interest because it allows your petitioner to receive their EB-5 investment back and utilize those funds to repay the loan.”
Loans for EB-5 investments should ideally come from entities separate from the NCE, JCE, or regional center.
Marjan Kasra: “So long as the entity loaning the funds is wholly separate from the [Job Creating Entity] JCE, the [New Commercial Enterprise] NCE, or the regional center owners, it’s theoretically plausible.”
Irina Rostova: “If an entity is willing to provide funds to investors, and those investors are taking responsibility for repaying those funds and then utilizing them to invest in the JCE and create jobs, it’s only facilitating the overall goal of the program. The investor still assumes the responsibility for paying that loan.”
EB-5 investors who submit supplemental filings ensure that all necessary documentation is in place when making partial investments, even if they repay their loan before adjudication.
Marjan Kasra: “We do an inter-filing where we supplement the original file to the Immigrant Investor Program Office (IPO) with all the further documentation showing the entire $800,000 plus the administrative fee. This inter-filing seems to be very successful whenever there’s a partial payment. There is presumably an agreement between the investor and the regional center. We also monitor that to ensure the investor is sticking by the agreement. It depends on where they are in the process. We try to get it in before the I-526 is looked at. I encourage my investors to get the money within six months to a year maximum [after applying]. It’s not wise to wait beyond that.”
The USCIS does not explicitly require a loan to be fully repaid before the investor files an I-829 petition.
Irina Rostova: “If you took out the loan, you don’t have to repay it at any time. The USCIS wants to see that you’re complying with the terms or the requirements of the loan. If you took out a 3-year loan with monthly payments that include interest and principal, then they will issue an RFE and ask how you’re paying at the I-526 or I-829 stage, or both. If you have a 5-year loan, and your investment cycle was six years in a project, USCI will likely issue you an RFE, although you might be already in the I-829 stage if the petitioner has flexibility, the longer, the better because it gives them time for the project to be developed to repay the investor.”
EB-5 investors who invest through a loan should have a plan to repay it, as the investment may not be repaid on time or in full.
Irina Rostova: “Any petitioner who is borrowing money must understand that an investment may not be repaid on time or in full. They need to have a plan B for how they’re going to earn that money and repay that loan.”
EB-5 investors should take loans from financial institutions or legal entities specialized in issuing them.
Irina Rostova: “If you are taking out a loan that does not come from a financial organization or organization that is regularly issuing loans, those funds will have to be sourced. So, it’s best to have a lending institution provide that capital. It doesn’t necessarily have to be a bank; it could be a company that offers loans. We’ll see how far and which institutions the USCIS will accept. A lot of private loans are coming out, like shareholder loans, from institutions that are in the business of financing projects. A petitioner may take out the loan from their own company or business. That’s perfectly acceptable if the source of funds from that company is also demonstrated.”
Marjan Kasra: “If a regional center can hypothetically partner with a lending institution willing to work with them, it would be ideal. Then, you’re dealing with a financial institution instead of a private entity loaning that money. But they must be in the money service business. If the State has authorized or labeled them as such, they are subject to anti-money laundering laws. This gives comfort to the USCIS.”
The repayment of a loan does not necessarily impact the EB-5 investment directly because both processes are typically separate.
Kyle Walker: “There isn’t a nexus between a loan being repaid and the EB5 investment per se. That lender or credit provider must have undergone an underwriting process. And that underwriting process might be entirely independent of the EB 5 investment as a cash flow component.”
A longer loan term gives EB-5 investors more time to repay the debt and gather evidence of the funding source for those payments.
Irina Rostova: “If the loan term is six or seven years, they can repay the loan using the project’s proceeds and return, the principle of the investment. If the loan is structured, the investor will have monthly payments, and the USCIS will most likely ask if those payments are being made in a timely manner and request the source of funds and documents on those payments.”
Marjan Kasra: “The investor must demonstrate the ability to repay the loan. Sometimes, approved cases are reopened. For example, even after receiving an approved I-526, three years later, during the I-829 stage, USCIS could reopen the case and question the source of the funds. This allows USCIS to further inquire about how the loans were being repaid. It’s crucial to work with the investor to ensure that they can clearly document how they intend to repay the loan.”
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