Can you take out a loan for your EB5 investment?
Understanding the legal financing options for your EB-5 investment will allow you to properly allocate funds and plan ahead for the investment. USCIS has recently changed course with regards to loan acceptance, so this blog will bring you up-to-date on the most recent rulings and developments.
EB-5 Loan Requirements
USCIS allows loans to qualify as legal capital contributions for EB-5 investments, but strict criteria must be followed.
Legal Source of Funds
Like with a standard EB-5 investment, the funds obtained through your loan will have to be derived from a lawful source of funds. Due diligence must be conducted, and how the lender legally obtained the loaned funds must be well documented, have transparent tracing from the lender to the borrower (EB-5 investor), and ultimately to the EB-5 project.
Investor Personally Liable
You as the EB-5 investor must be the established borrower of the loan with sole liability of repayment. No assets related to the EB-5 project itself can be used as collateral.
Unsecured and Secured Loans
In October of 2020, a three-judge panel finally ruled in favor of EB-5 Investors after a long 5-year dispute with USCIS, permitting the use of both secured AND unsecured loans for EB-5 investments. USCIS can no longer deny EB-5 petitions on the basis of how the loan was acquired.
“As far as the enterprise is concerned, whether or how the investor’s loan was secured makes no difference; it can deploy the cash either way, and it faces no exposure if the investor defaults on any obligation to a third-party lender.” – Judge Gregory G. Katsas
USCIS allows for EB-5 funds to derive from both secured and unsecured loans so long as no assets involving the EB-5 project are used as collateral. Clients all over the globe have unique financial circumstances, and Dynaxe Capital can assist with unique loan strategies for their EB-5 investment.