Questions and Answers > EB-5 Investments

What is the standard for loan repayment?

I am looking at EB-5 project information. One project states the EB-5 fund repayment: "with an expectation for loan repayment in 5 years—with a 1 year option." What does this mean? Is this standard in the industry?

Answers

• Reza Rahbaran

  Immigration Attorney

  Answered on March 5, 2014

  It is normal to see a loan repayment in five years. It means that the funds are secured by a five year note.

• Fredrick W Voigtmann

  Immigration Attorney

  Answered on January 7, 2014

  Five years is pretty standard, not sure about the one-year option. Sounds like a six-year loan repayment to me.

• Lynne Feldman

  Immigration Attorney

  Answered on January 6, 2014

  Your money must be at risk until the I-829 is approved. Many projects want all of the investors I-829s approved for that phase of the project before they implement their exit strategy for you to get funds out.

• Philip H Teplen

  Immigration Attorney

  Answered on January 6, 2014

  This is very typical, wherein the money is secured with a five year note and a one year option to convert to equity. The important thing is to analyze the project to best determine the risk that the five year note may not be able to be refinanced to satisfy the note. I will be very happy to review with you.

• A Olusanjo Omoniyi

  Immigration Attorney

  Answered on January 6, 2014

  There is no standard for loan repayment.

• Salvatore Picataggio

  Immigration Attorney

  Answered on January 3, 2014

  For an EB-5 project using a loan model (where the investments are pooled in the new commercial enterprise and loaned to the job creating entity), this looks to be in line with the industry. However, you will want all documents reviewed by qualified U.S. immigration counsel for compliance with USCIS EB-5 rules and regulations. Further, the immigration counsel should coordinate their review with the review of a securities or corporate attorney.

• Jinhee Wilde

  Immigration Attorney

  Answered on January 3, 2014

  Many EB-5 projects are loan-based these days rather than long-term equity, as it has been several years ago, because they found that it is easier to repay the EB-5 investors with the loan by refinancing or selling as long as the project is successful. The 5 year term with 1 year option would be that the investors could be repaid in 5 years but that the borrower has the option of extending that loan for another yearthis option to extend is a common practice in loans.

• Walter Gindin

  Immigration Attorney

  Answered on January 3, 2014

  Many EB-5 investments are structured such that the new commercial enterprise into which the immigrant investors will make their investment (i.e. contribute capital) will subsequently loan the proceeds of the EB-5 investments to another entity that will then use those funds for a variety of project-related activities (i.e., to finance construction costs). The indebtedness between the new commercial enterprise and the debtor-entity is often secured by a formal agreement. The specific terms of these loan agreements vary from project to project. Although I cannot say for certain since I have not read the particular agreement to which you are referring, it nevertheless appears that the 5-year term refers to the time frame within which the debtor-entity is expected to repay the EB-5 loan from the new commercial enterprise. Note that this repayment does not (and should not) guarantee that the new commercial enterprise will use the ''repaid'' funds to then return the investors capital contributions. Any such guarantee by the new commercial enterprise to the immigrant investors likely would be construed by USCIS as undermining the ''at risk'' nature of their investment.

• Ed Beshara

  Immigration Attorney

  Answered on January 3, 2014

  In an EB-5 Regional Center project, the EB-5 rules and policy allow the foreign investors invest in the new commercial enterprise which is then authorized to loan the funds to the job creating entity. The offering and loan documents will state clearly the exit strategy, which may mean the repayment of the loan by the job creating entity to the new commercial enterprise.

• Rohit Kapuria

  Immigration Attorney

  Answered on January 3, 2014

  Current estimates for return of investments is 5 years. This includes the time for I-526 approval, consular approval, the I-526 term, and I-829 approval. Note, the investments must always remain at risk. Therefore, there can never be a guaranteed return of investment. It is difficult to glean the intent of the drafter from the short snippet you provided in your question, however, I would assume that an ''expectation'' means that a return is not guaranteed. Furthermore, having a 1-year option to extend the return time frame is typical, in case investor petitions have longer than expected processing times.

• Charles H Kuck

  Immigration Attorney

  Answered on January 3, 2014

  There is no ''standard in the industry'' right now. Each regional center is different in how it approaches repayment. One thing is consistent through all of them, as with all high risk investments, there is guarantee of the return of your investment. Whatever conditions are set, as here, are all set in the context of ''if'' they can meet the criteria for repayment. But, virtually none of them make the guarantee that you will be repaid in a certain, or ever.