Administered by the U.S. Citizenship and Immigration Services (USCIS), the EB-5 Immigrant Investor Program is an invaluable resource for qualified foreign investors seeking permanent residency in the United States by taking part in strategic investment opportunities.

While personal funds constitute a significant portion of all EB-5 investments, many EB-5 investors have turned to loans to explore new ways of accessing capital.

In this article, we will provide some tips on managing risk and maximizing chances of success, as well as several strategies EB-5 investors can employ to strategically fund their investments using loan proceeds.

Summary of the EB-5 Visa Program

The EB-5 visa program is a United States immigration program that allows foreign investors to make a significant capital investment in the U.S. in exchange for permanent residency.

Established by the Immigration Act of 1990, the program’s goal is to spur job creation for U.S. workers and invest substantial capital in underrepresented regions needing economic growth.

The types of investments foreign nationals can make include direct investments and investments in regional center projects.

Direct investments involve EB-5 investors injecting capital directly into a new business to create at least 10 full-time jobs for qualifying U.S. workers.

Regional center projects designated by USCIS focus on promoting economic growth in underdeveloped geographic regions, with funds from EB-5 investors required to create jobs, develop real estate, and foster other regional growth opportunities.

How to Use Loan Proceeds for EB-5 Investments

While investing capital into a project, EB-5 investors have several financing options, including using loan proceeds. Let’s explore several aspects of this option.

Can a Loan Be Used to Fund an EB-5 Investment?

Yes, a loan can be used to fund an EB-5 investment. EB-5 investors can take out different types of loans, such as personal loans (based on one’s credit score and assets), collateralized loans (backed by investments), and co-signer/guarantor loans.

However, it’s essential to remember that EB-5 investments are considered “at-risk,” meaning failure to comply with the program’s terms, such as creating the minimum number of jobs or meeting other specifications, can result in investment loss. This means any secured loan cannot be secured by the EB-5 investment itself. It needs to be secured by the investor’s personal assets, and the source of the funds used to purchase the asset needs to be lawful.

Though less common, EB-5 investors can also use unsecured loans, while paying additional attention to providing a comprehensive paper trail. More about unsecured loans will be covered below.

A Word on Zhang vs. USCIS

Between 2015 and 2020, USCIS temporarily stopped accepting unsecured loans. The agency decided that cash from unsecured loans should be classified as “indebtedness” rather than “cash.” As a result, many investors had their immigrant petitions denied.

When the I-526 petitions of two EB-5 investors, Zhang and Hagiwara, were denied due to their loans being classified as “indebtedness,” they challenged USCIS in court.

Zhang vs. USCIS then became one of the most important court cases in the history of the EB-5 program. After a long process that led up to the investors’ victory, in July 2021, USCIS announced that it would stop categorizing funds from unsecured loans as “indebtedness.”

Naturally, this case offered more clarity to prospective investors seeking to diversify their EB-5 financing options.

Understanding the Basics of Using Loan Proceeds

When planning to invest in the EB-5 Immigrant Investor Program, it’s essential to understand the loan terms and conditions. Here are some key factors to consider:

1. Investment Amount

The EB-5 program requires a minimum investment of $800,000 for projects in targeted employment areas (TEAs) and $1,050,000 for other areas. If you plan to use a loan, you need to ensure the source of the borrowed funds can be clearly documented.

2. Interest Rates

Interest rates on loans can vary widely based on the lender and market conditions. EB-5 investors should seek out loans with competitive, market-level interest rates.

3. Loan Duration

The length of the loan term will impact your repayment schedule and the total amount paid. Loan terms generally range from five to 20 years. It’s important to choose a term that fits your overall financial strategy.

4. Repayment Terms

Repayment options differ from loan to loan. Some may require monthly interest payments with a lump sum principal payment at the end of the term, while others offer a more gradual repayment plan throughout the loan term. Be sure to fully understand the repayment terms before finalizing your loan agreement.

Get Expert Support From EB5AN

Investing in an EB-5 project requires plenty of due diligence and carefully vetting all information provided by regional centers and the project stakeholders. When determining your EB-5 financing options, you should rely on only the most seasoned professionals with expertise in strategic EB-5 investments.

EB5AN has assisted more than 2,300 families from 60 countries, guiding them through the process of obtaining permanent residency with resounding success.

To learn more about the best ways to fund your EB-5 investment, book a free call with our expert team today.