Repayment Guaranty: How to Judge If a Guarantor Is Truly Reliable

The EB-5 program is primarily valued for the chance to obtain permanent residency in the United States, but most investors also hope to eventually recoup their investment.

When an EB-5 project is financially successful and able to pay back its EB-5 loan, investors receive their funds as described in the project’s offering documents. Still, even developments with well-thought-out plans and solid capital structures can encounter unexpected challenges. The U.S. real estate market, which hosts many EB-5 projects, is especially prone to rapid shifts. And while investors want certainty, EB-5 rules prohibit personal contractual repayment guaranties.

That said, there are mechanisms projects can use to provide added security for their investors. One of the strongest is a repayment guaranty. Under this arrangement, another entity agrees to repay the EB-5 loan if the borrower is unable to.

However, such a guaranty is only as dependable as the guarantor itself. If the guarantor does not have the resources to make good on the promise, the guaranty adds little protection.

This article explains how repayment guaranties function in EB-5 projects, why the guarantor’s financial strength is essential, and what factors investors should examine before committing to a project with a repayment guaranty.

The Financial Risk in EB-5 Investments

To see how repayment guaranties fit into EB-5 offerings, it helps to look at how funds move through a project.

Typically, an investor wires their capital to an escrow account overseen by the regional center’s investment fund. This fund then loans the capital to the project entity developing the real estate. The project company is the borrower of the EB-5 loan.

Once the loan matures, the borrower is expected to repay the investment fund, which then distributes the repayment back to individual investors.

The challenge is that repayment to investors is entirely dependent on whether the EB-5 loan itself is repaid. If the project succeeds and can cover its obligations, repayment occurs. But EB-5 rules require that investor funds remain “at risk,” so investors cannot be given a personal repayment guarantee.

In practical terms, this means the investment can result in either loss or gain.

Another factor to keep in mind is the project’s capital structure. EB-5 loans are often lower in priority compared to other financing sources, so senior lenders are repaid first. Even financially solid projects can encounter difficulties or market changes that affect their ability to repay.

Given the minimum EB-5 investment of $800,000, it is natural for investors to look for ways to reduce this financial risk.

How Repayment Guaranties Work

A repayment guaranty is one tool that can lower risk in EB-5 offerings. In this arrangement, a guarantor pledges to cover repayment of the EB-5 loan to the investment fund if the borrower defaults or faces financial obstacles.

The guaranty’s terms—such as whether it covers the full loan or a portion, and the conditions that trigger repayment—are specified in the loan agreement and guaranty documents. Importantly, these guaranties are legally enforceable. They function much like collateral, giving investors added assurance that funds will be repaid if the borrower cannot meet its obligations.

Why Repayment Guaranties Are Allowed

Since each EB-5 investment must involve some element of risk, individual investors cannot be given direct repayment guarantees. A loan repayment guaranty does not remove risk entirely, however, because it only obligates the guarantor to repay the loan—not to guarantee repayment to each investor personally.

This distinction ensures that the at-risk requirement of the EB-5 program remains intact. If the guarantor itself encounters financial strain, repayment may still be at risk. But a strong, well-capitalized guarantor significantly lowers that possibility.

Because the guaranty is an agreement between the lender (the investment fund) and the borrower (the project company), and not a guarantee of principal to each investor, USCIS has consistently approved projects with such structures—including EB5AN’s.

What Makes a Strong Guaranty?

The value of a repayment guaranty depends entirely on the guarantor. Investors should consider several points to determine whether a guaranty is truly secure.

• Is the guarantor a parent or holding company of the developer?

Large developers or their holding companies often have substantial equity and diversified assets spread across multiple projects. This financial strength makes it more likely they could repay the EB-5 loan even if one project falters. A history of completing projects and repaying obligations is another positive indicator.

• Does the guaranty include minimum equity coverage?

Many of the strongest guaranties require the guarantor to maintain a set equity ratio. For example, a 150% coverage requirement means that for every $1 in guaranteed debt, the guarantor must maintain at least $1.50 in equity. If equity drops below this threshold, the developer may be required to inject capital or take corrective measures. These provisions make repayment far more likely, even if the project underperforms.

A well-capitalized guarantor with diversified assets and strong equity coverage can provide significant protection.

Weak Guaranties Investors Should Avoid

Not every repayment guaranty offers real protection. Warning signs include:

• The guarantor lacks enough equity to cover the full EB-5 loan.
• The guarantor has no established track record of repaying obligations.
• The developer refuses to provide details or financial statements on the guarantor.
• The guarantor is closely tied to the lender or developer, creating conflicts of interest.

Any of these factors could render the guaranty ineffective and leave investor funds exposed.

EB5AN’s Guaranties With The Kolter Group

At EB5AN, we prioritize offering investors a high level of safety, often exceeding typical industry standards. To achieve this, we partner with developers who have proven track records and sufficient assets to secure EB-5 loans.

Since 2014, EB5AN has worked with The Kolter Group on multiple EB-5 projects, all of which have included repayment guaranties or the option to add one. Kolter’s extensive assets and equity fully secure each EB-5 loan.

Kolter has successfully weathered economic downturns, including the 2008 financial crisis, and has invested more than $20 billion into real estate projects over nearly two decades. Every EB5AN–Kolter project has received USCIS approval, and all EB-5 funds have either been repaid or remain in good standing.

This record demonstrates why Kolter is an ideal guarantor for EB-5 loans.

Lowering Risk With the Right Project

While individual EB-5 investors cannot receive direct repayment guarantees, choosing a project with a strong loan repayment guaranty can significantly reduce financial risk.

By carefully selecting such a project, investors improve their chances of both securing permanent residency and recovering their investment.

If you would like to learn more about EB-5 projects with strong repayment guaranties, schedule a free consultation with our expert team today.