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How can I use a SBA loan for my cousin's EB-5?

I am a U.S. citizen and I would like to help my 32-year-old cousin, who is not a U.S. citizen, invest in EB-5. I run a small business and if I can get a SBA loan, can I gift the money to him as the investment capital? Or could this jeopardize my business?

Answers

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    Bernard P Wolfsdorf

    Immigration Attorney
    Answered on

    Provided this is in accordance with SBA rules, you might be able to gift the money so he can invest in an EB-5 project.

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    Julia Roussinova

    Immigration Attorney
    Answered on

    It may or may not be possible for you to gift funds originating from your SBA loan for your cousin's EB-5 investment. First, you need to review the terms of the loan with an attorney to determine if they allow use of an SBA loan proceeds for a gift rather than use for your small business development. Furthermore, you, as a donor, must explain your lawful source of gifted funds as part of your cousin's EB-5 application to USCIS. USCIS generally requires that a loan must be secured by a collateral (asset) that the EB-5 investor owns (i.e. your cousin). An SBA loan is usually an unsecured government loan for small business funding. Consult an attorney before you proceed further.

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    A Olusanjo Omoniyi

    Immigration Attorney
    Answered on

    Pay attention to the conditions governing the SBA loan. Chances are it may be impossible. As part of your application for a loan, you are required to detail the business purpose of the loan, such as expansion of the business, which can in turn help create jobs and improve the economy. The idea of turning over a loan as a gift for EB-5 financing will not accomplish the growth of your business. Thus, your proposal does not seem to fit an acceptable proposal. Also, a loan which does not benefit the business in question will simply increase the business' debt/equity ratio and may even drive the business into bankruptcy. Advisably, consult a corporate attorney to review your loan proposal and any legal obligations before proceeding further.

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    Daniel A Zeft

    Immigration Attorney
    Answered on

    If you are given the SBA loan for your business, then it does not seem appropriate for you to give the money to your cousin as a gift.

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    Jinhee Wilde

    Immigration Attorney
    Answered on

    Any loan must be secured by an asset that the investor, in this case, your cousin, owns. Furthermore, as an SBA loan is a government loan to help U.S. small businesses and their owner(s), it would not be appropriate to use that for EB-5 purposes.

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    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    A gift certainly is a valid source of funds as long as the donor's source of funds is lawful as well. Be aware, however, that USCIS does not allow unsecured loans to be used for EB-5 purposes and it requires that the investor himself or herself be personally and primarily liable for the debt. You also may have tax issues (gift taxes) or other problems if you cannot repay the loan as agreed. You should consult with an experienced attorney who can advise you in greater detail about how to proceed.

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    Belma Chinchoy

    Immigration Attorney
    Answered on

    You cannot gift him loaned funds unless the loan is collateralized by an asset your cousin owns.

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    Phuong Le

    Immigration Attorney
    Answered on

    Provided that it is a true gift and you are willing to bear the risks of the loan (and possible questions about your own source of funds), then a gift to your relative may be possible. Consult with an attorney.

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    Lynne Feldman

    Immigration Attorney
    Answered on

    It is hard to know without reviewing your contract with SBA. I am guessing they want the loan invested in your business and not gifted out.

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    BoBi Ahn

    Immigration Attorney
    Answered on

    For EB-5 purposes, the investor may obtain funds from a gift as a legitimate source of funds. As far as whether this would jeopardize your business, that depends on how solid his investment is. That is something you will need to discuss and assess with your cousin.

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    Charles Foster

    Immigration Attorney
    Answered on

    While you may get an SBA loan as a U.S. citizen, you could in theory gift the money to your cousin, but it would depend upon the terms of the SBA loan and whether the loan gave you that flexibility. If the terms of the SBA loan did not permit the transfer to your cousin, that could negatively impact whether or not your cousin's EB-5 petition on Form I-526 would be approved.

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