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The Use of Bridge Financing in EB-5 Projects

509-The Use of Bridge Financing in EB-5 Projects

United States Citizenship and Immigration Services (USCIS) established the EB-5 Immigrant Investor Program in 1990 as a way for foreign nationals to legally immigrate to the United States with an eventual opportunity for citizenship by making a substantial investment that bolsters the U.S. economy. The investment must be made in an approved project that will create and maintain a minimum of 10 full-time jobs for U.S. workers per investor.

The EB-5 Program has gradually become more popular over the years since its establishment. Unfortunately, this has led to extensive delays in processing petitions, in some cases delaying the processing time two to three years. Not only are these delays a frustration for investors wishing to quickly complete their immigration, they have in some cases had a negative impact on the progress of EB-5 projects. Temporary funding, also known as “bridge” funding, is a permitted way to finance a project while waiting for EB-5 investment funds to become available for use and has been in use for the past five years. Bridge funding is beneficial to both project developers and investors, as it allows investors to get credit for jobs created as a result of replacing bridge financing with EB-5 investment funds and also allows for the continuation of a project while EB-5 funds are still pending due to delays in petition processing.

However, despite the popularity and success of this form of financing, USCIS has begun placing restrictions on the use of bridge financing. It has specifically stated that bridge financing cannot be used for longer than one year, must have been considered before the project actually begins, and must be fully mature before the estimated end date of project construction. If these requirements are not met, USCIS may deny approval for projects using bridge funding.

All things considered, it is important for investors to be wary of projects that intend to depend on bridge financing for lengthy period of time (several years). Investors should ensure that funding and project progress are planned in a way that ensures that the EB-5 funds are used to further project development when they are finally released into the project rather than just being used to reimbursebridge loans.

Performing due diligence is vital if investors wish to avoid common pitfalls related to EB-5 investments. EB-5 immigrant investors should keep apprised of changes in USCIS regulations regarding investment financing and specifically bridge financing to be aware of the possible impacts on potential EB-5 projects.