Families and individuals interested in the EB-5 immigrant investor program frequently ask if they can use the proceeds of a loan or mortgage to fund their EB-5 investment. When they learn that this is, in fact, permitted, follow up questions abound regarding the appropriate time period for repaying the loan. Although the United States Citizenship and Immigration Services (USCIS) has never presented any guidelines for the repayment of loans used as EB-5 capital, the fundamentals of the EB-5 program make it prudent for any potential immigrant investor to seriously consider the issue.
USCIS has made it clear that proceeds of a loan are an acceptable form of capital for an EB-5 investment. In such a case, the EB-5 investor must be the principal borrower of the loan and personally liable for repayment, and the loan must be secured by personal assets of the investor. USCIS will also require documentation of the lawful source of the funds at the I-526 petition phase, and that the capital be placed in an “at risk” investment until the adjudication of the investor’s removal of condition application (I-829).
The concern for potential immigrant investors is that if the terms of the loan require repayment before their I-526 petition is approved, USCIS will require additional documentation from the immigrant investor to prove the lawful source of the funds used in paying off the loan. On the other hand, some potential EB-5 investors are concerned that if the duration of their loan is exceedingly long, USCIS may not deem the funds to be at risk. The two concerns are considered separately below.
USCIS has not publicly expressed repayment requirements for loans used to fund investments. Nevertheless, it is advisable to structure such loans so that repayment follows the approval of your I-526 petition. If you intend to use a loan to supply the capital for your EB-5 investment, you will need to provide documentation of the lawful source of the lender’s funds as well as the lawful source of your assets which secure the loan. Documenting the source of your funds can be a burdensome task requiring several years of tax returns, business records and other financial documents. If your loan is repaid prior to the approval of your I-526 petition, there is a possibility that USCIS will also require documentation of the lawful source of funds used to pay off the loan. However, once your I-526 petition is approved, you will not be required to prove the source of funds again.
The EB-5 immigrant investor program requires immigrant investors to place capital in an “at risk” investment up until the end of their 2-year conditional residency. Capital can neither be governed by redemption agreements protecting against loss, nor contractual promises to repay funds. For your capital to be “at risk,” there must be a chance that it will be lost.
Therefore, regardless of when your loan is repaid, if the capital remains invested in a nonguaranteed investment during your conditional residency period, it will likely satisfy the “at risk” requirement.
At Jatoi & de Kirby, A.P.C., we know how important it is to you and your family to secure the right loan for your EB-5 investment. Our attorneys can advise you on the requirements of the EB-5 program and obtaining permanent resident status for you and your family. Contact us today.