Why Loans From Regional Centers Can Jeopardize Your EB-5 Petition

For many, the EB-5 visa program is an opportunity to secure a future for themselves and their families. But the process comes with strict rules, and one mistake can stop the entire application. A possible error that investors can fall into is accepting financial help from the regional center itself.

In some cases, regional centers offer loans to EB-5 investors to help them meet the required investment amount. This might seem helpful at first. But in reality, it can lead to serious problems as it can violate key EB-5 rules, including the at-risk and source of funds requirements.

In this article, we will explain why accepting loans from a regional center can lead to the loss of your investment and Green Card.

The At-Risk and Source-of-Funds Requirements Explained

The EB-5 program has two important financial rules: the investment must be at risk, and the source of funds must be legal and properly documented. These rules help USCIS confirm that no one is misusing the system. Failure to stick with these instructions can lead to you receiving a request for evidence (RFE) or a denial of your I-526E petition.

Let’s look at both of these requirements in more detail.

The At-Risk Requirement

USCIS will not approve your EB-5 petition unless you place the required amount of capital at risk in a commercial enterprise. Here is what at-risk means in the EB-5 context:

• You must transfer either $800,000 or $1,050,000 into a new commercial enterprise (NCE), the business entity that receives EB-5 funds. In most cases, the money is first placed in an escrow account.
• Upon release from escrow, your funds are sent from the NCE to the EB-5 project or job-creating entity (JCE).
• The capital must be subject to both the possibility of gain and the risk of loss. That is, the investor cannot receive a guaranteed return or a promise of repayment.
• The capital must remain invested in the project for at least two years.

What Proving EB-5 Source of Funds Entails

USCIS requires every EB-5 investor to prove the legal source of their investment funds, with a clear, traceable path from origin to the NCE. This rule helps ensure that the money comes from legal and personal sources, not from illegal activities or financial tricks. To meet the source-of-funds requirement, you must show:

• How you earned or obtained the money.
• That the money is lawfully yours.
• That you transferred the money legally into the U.S. or into the regional center’s account.

This documentation often includes tax returns, pay stubs, bank statements, sale agreements, business records, or loan documents. Moreover, each type of source, whether it’s a salary, a gift, or a loan, has its own required documentation.

Does the EB-5 Program Allow Gifted or Loaned Funds?

The Immigration and Nationality Act allows for the use of gifted or loaned funds as long as the following conditions are met:

• The funds must be traceable to a lawful source and ultimately belong to the EB-5 investor.
• They must be wholly owned by the investor and given to him or her in good faith.
• They must not proceed from illegal activity.

It is important to note that loans from unlicensed institutions and loans gotten below-market rates would draw close scrutiny from USCIS officials, which can result in an RFE.

Why You Should Steer Clear of EB-5 Loans From Regional Centers

A lot of compliance issues arise when you accept loans from regional centers or NCEs. The same applies to funds gotten from an entity affiliated with or controlled by the NCE. Let’s take a look at these concerns below:

• When you borrow your investment from the regional center itself, the capital is not truly at risk. Instead, it becomes a “circular transaction” where the same organization funds and receives the investment.
• If the capital originated from the NCE, new EB-5 job creation claims will not be valid with the investment. This is because the funds were already owned by the NCE and probably derived from earlier EB-5 investors.
• The funds would never be “at risk” because it was never truly owned by the EB-5 investor to begin with. In other words, the investor has not actually faced a real financial risk.
• The NCE using existing EB-5 funds as loans for new investors could be considered a type of Ponzi scheme. The U.S. Securities and Exchange Commission (SEC) defines a Ponzi scheme as “an investment fraud that pays existing investors with funds collected from new investors […] the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves.”
• If you borrow the money from a regional center, you will find it difficult to prove the legal origin of those funds. Additionally, you will not be able to show that you earned the money or that it came from an independent source, which can lead to a swift USCIS denial.

Partner With EB5AN to Secure Your Green Card

The EB-5 process requires careful planning, clear documentation, and full legal compliance. USCIS checks each I-526E petition to make sure the investment is lawful, properly sourced, and placed at risk. So, if you are planning to invest through the EB-5 program, be careful to use your own funds or borrow from a clear and lawful source, instead of a regional center.

One way to ensure you are compliant is to work with professionals who have your best interests at heart. At EB5AN, we help investors avoid risky shortcuts to give their petitions the best chance of success. So far, we have helped 2,700+ families across more than 70 countries receive their Green Cards.

To protect your money and your future by ensuring a compliant EB-5 investment, schedule a free consultation with EB5AN today.