What are the limitations for usage of EB-5 funds?

The answers to your questions actually vary from project to project; to find out, for a particular project, when the developer can start to use EB-5 funds, and what the limitations on usage of the EB-5 money are, you should consult the offering documents for the project.

The use of the EB-5 funds should be clearly defined in the offering documents.

These are arrangements that you need to make in writing with the developer or regional center before you invest.

The release of an EB-5 investment depends upon the stipulation found in either the Escrow Agreement or the Subscription Agreement. It is purely a private arrangement. Be sure to engage in a meaningful negotiation with the developer, so you could gain the best of the deal.

Escrow is not required for EB-5. Escrow is allowed in EB-5 and it is common because the foreign investors want some assurance that USCIS will approve the I-526 before the project spends their money. If there is an escrow arrangement, it usually is set up with a trigger to release the EB-5 funds to the project upon some event. That event could be agreed upon by the parties. It might be the approval of the I-526; it might be the approval of an earlier-filed I-526 in the same project by a different investor. It could be upon the filing of the I-526. There is no immigration law or rule setting what the terms of the escrow should be. Automatic release of the fund to the project upon the occurrence of the trigger event is required in order for the capital to be "at risk." Usually, if the I-526 petition is denied or the trigger event does not occur, then the funds automatically are returned to the investor. The ultimate use of the EB-5 funds by the project should be clearly described in the business plan, and that plan should be followed as much as possible.

It is not a requirement that investor funds are placed into escrow. In fact, it is a concession by USCIS as the funds are required to be fully committed to the project prior to filing an I-526 petition. The fact that many projects use escrow is a commercial decision. The funds can be made available at the time of investing, at the time of I-526 or visa approval or any time in between. The terms of the subscription (and any escrow arrangement) will determine precisely when funds are available. With processing times approaching 15 months, it is likely that projects will require access to the invested funds earlier.

When EB-5 funds can be removed from the escrow account is generally controlled by the escrow agreement.

There is no requirement that EB-5 funds be placed in an escrow. In fact, the EB-5 rule actually states that the investment funds be placed "at risk." However, as most of the EB-5 investors would like to make certain that their immigration case would be approved and if the case gets denied they could get their money back, most EB-5 businesses do hold the funds in escrow. Thus, all these issues are dependent on your relationship with the investor and what kind of business you have, and something you and the investors need to discuss and agree.

The limitations and conditions of access to EB-5 funds depend on the agreement made between the developers and/or project management regarding when the funds may be accessed. We have seen both cases where the funds are held in escrow conditioned on I-526 petition being approved, as well as EB-5 investments that are immediately released, depending on the needs and agreement of the project development.

It depends. Some developers begin using the funds immediately, some wait for I-526 filing, and others for approval. It depends on the project. Funds should be used for the named business activities that give rise to job creation.