Loaned EB-5 Investment Capital: Source-of-Funds Requirements

Relocating to the United States through the EB-5 investment program holds many benefits for foreign nationals. Those who become investors in new commercial enterprises (NCEs)—and create at least 10 jobs for U.S. workers in the process—are entitled to permanent resident status.

Starting on June 22, 2021, EB-5 investors need to contribute only $500,000 for projects located in targeted employment areas (TEAs). These areas have been identified as locations with higher economic needs. For investments outside of TEAs, an investment of $1,000,000 must be made.

EB-5 investments can be made by a qualifying investor from any country, and capital for EB-5 investments can come from a variety of sources. After making an EB-5 investment, foreign nationals must submit Form I-526 to United States Citizenship and Immigration Services (USCIS). This visa petition must prove that the capital used in the EB-5 investment was sourced legally.

Investors have to submit several documents in Form I-526 in order to meet USCIS’s high evidentiary standards. This article explains how EB-5 investors who use loaned funds can prove the legality of their capital when completing Form I-526.

How to Demonstrate the Legality of Loaned Capital

Every EB-5 investor is required to provide ample evidence tracing the invested funds back to their original source. Loan contracts should be included in Form I-526 since they explain the terms of the loan, including the deadline for repayment and interest rate. Contracts must also show what personal assets were used to help secure the loan. There is a legal precedent (Zhang v. USCIS) to use unsecured loans to finance EB-5 investments, but it is easier and safer to use secured loans for these purposes. Talking with an experienced immigration attorney can help each investor determine the best way to go about making an EB-5 investment.

Investors also need to show proof that any personal assets used to secure a loan were legally sourced. For example, if an investor purchased real estate using funds from their salary, Form I-526 has to show that the salary payments were lawful and that the property is owned by the investor.

Additionally, a capital source statement is required, and it must show that the capital came from a legally sourced loan. If any funds used in the process were borrowed from an individual, documentation must also be provided by that individual.

The personal income tax returns of the investor for the last five years should also be included in Form I-526. If these tax returns are unavailable in an investor’s home country, there should be a written explanation by a tax professional from that country. In this case, investors may be able to provide alternative information instead.

The types of documentation needed to show the legality of funds used in an EB5 investment will differ from case to case, especially if a loan is made by an individual instead of a financial institution. All investors must remember that gathering the evidence needed will require significant time and effort, making it in their best interest to secure the guidance of an immigration attorney to help them navigate this stage of the EB-5 process.