Why an EB-5 Repayment Guaranty is Permitted under EB-5 Program Rules and How it Can Reduce Your EB-5 Investment Risk

Why a Corporate Repayment Guaranty is Allowed
(Greenberg Traurig, LLP and George & Marzialo PLLC)

One of the key requirements of an EB-5 investment is that investor funds must be placed “at risk” in a new commercial enterprise. The invested money must be subject to gain and loss. As a result, every EB-5 investment must have at least some risk to qualify investors for a Green Card.

But satisfying the EB-5 at-risk requirement does not mean you have to take on an unnecessarily high level of risk. If given a choice between two similar projects where one is high risk and the other is low risk, which would you choose?

You’d choose the one with lower risk.

One project feature that significantly reduces financial risk for EB-5 investors is a repayment guaranty from a well-capitalized, diversified company. This company needs to have substantial assets that far exceed the total amount of the EB-5 loan.

Many EB-5 investors do not know that an EB-5 loan can be secured by a repayment guaranty. Unfortunately, some regional centers and brokers are spreading false information and misleading investors on this subject. They are selfishly encouraging investors to avoid projects that feature the added financial safety of a repayment guaranty.

In this article, you’ll learn the truth about repayment guaranties: what they are, why they are allowed, and how they reduce investment risk for EB-5 investors.

What Is a Repayment Guaranty?

For EB-5 investments structured as loans, a repayment guaranty is a commitment from a guarantor made to the EB-5 lender. The guarantor promises to repay the EB-5 loan in case the borrower of the EB-5 loan fails to repay. A repayment guaranty adds a layer of financial security to the EB-5 investment.

Don’t Be Fooled: Misinformation about Repayment Guaranties

It is easy to understand why an investor might think that a repayment guaranty would violate the EB-5 at-risk requirement. If repayment is guaranteed, then the investment is not at risk. Right?

Not exactly.

For EB-5 funds to be at risk, a project cannot promise to repay its investors even if the project fails. But for reasons we’ll examine later in this article, a loan repayment guaranty, for the benefit of the EB-5 lender or “new commercial enterprise”, is allowed under EB-5 program rules.

Some regional centers are telling investors that having a loan repayment guaranty is not allowed. Here is what a major regional center recently told an investor when asked if the EB-5 loan was secured by a repayment guaranty:

“EB-5 investment should be at risk. If there is a repayment guaranty, USCIS will not approve I-526 or I-829.”

Our EB-5 projects are proof that this statement is simply not true.

But why would a regional center say this in the first place? Perhaps they do not know that a repayment guaranty is allowed. To be fair, EB-5 loans secured by repayment guaranties are rare. Or, perhaps, they want investors to invest in their projects that do not offer a repayment guaranty.

At EB5AN, we believe that clear and transparent information leads to better decision making. We want you to be fully informed about how a repayment guaranty can increase the financial security of your EB-5 investment.

Why Is a Repayment Guaranty Allowed?

For an EB-5 investment to be at risk, it must be subject to gain or loss. While a repayment guaranty reduces this risk, it does not eliminate the risk of loss entirely.

An EB-5 loan with a repayment guaranty is still at risk. The guarantor could default on its promise to repay. In such an event, the EB-5 lender would take legal action to enforce the guaranty and seize the assets of the guarantor. In the unlikely event that the guarantor is unable to fully repay the balance of the loan, the EB-5 investors could lose some or all of their invested funds.

For sake of illustration, imagine that a company like Microsoft—one with substantial assets and equity and a long track record of success—were to guaranty the repayment of a loan from an investor. This would be about as strong a repayment guaranty as an investor could get. But even then, as remote a possibility as it is, the risk of loss still exists because Microsoft could theoretically fail. The potential for gain also exists because the loan is going to charge Microsoft interest on the loaned funds.

If the potential for gain and the risk of loss exist, the EB-5 at-risk requirement is met. The potential for gain and the risk of loss must simply be present, no matter how small or unlikely, to satisfy EB-5 rules.

Real Examples of USCIS Approved Projects with Repayment Guaranties

Since 2014, EB5AN has worked with The Kolter Group to provide multiple EB-5 loan projects. Each of these projects has either had a repayment guaranty from Kolter or the ability to add one. With a repayment guaranty, the entire balance of each EB-5 loan is secured with sufficient assets and net equity of a guarantor company—far more than needed to cover the amount of the EB-5 loan. And Kolter has a sterling 25-year track record of repaying all of its loans.

USCIS has awarded exemplar status to some of these projects and has approved multiple I-526 petitions for these projects’ investors.  These projects have a 100% USCIS project approval rate.

How Does a Repayment Guaranty Reduce EB-5 Investor Risk?

The primary financial risk for EB-5 investors is the loss of their investment capital. With an EB-5 loan, the specific risk is that the borrower fails to repay the loan when it matures. If the EB-5 loan is not repaid, the EB-5 investors will lose their invested funds.

A repayment guaranty secures the EB-5 loan against the guarantor’s assets. In addition to the borrower, the guarantor has also committed to repay the loan. The more financially secure the guarantor is, the stronger the guaranty is—and the lower the financial risk to EB-5 investors.

The best repayment guaranties are by third-party corporate companies with diversified assets. Such a guarantor would be independent from the lender and have more than enough assets and net equity to secure the entire amount of the EB-5 loan. The more substantial and diversified a guarantor’s assets are, the more likely it will be able to honor its guaranty and repay EB-5 funds in full and on time.

How to Find a Project with a Repayment Guaranty

An EB-5 project with a repayment guaranty from a separate company with a diversified balance sheet is very rare. If you find a project that says its loan has a repayment guaranty, it may be a great investment opportunity. But you should always verify this kind of claim.

You should ask several key questions about the repayment guaranty and the guarantor.

  • What history and track record does the guarantor and its affiliates have?
  • Has the guarantor and its affiliates borrowed large amounts from institutional lenders?
  • Are all of the guarantor’s debts either repaid or in good standing?
  • What kinds of assets does the guarantor have?
  • Does the guarantor have far more assets and net equity than needed to cover the EB-5 loan?
  • What covenants are in place to allow investors to verify the guarantor’s assets on an ongoing basis?

Ask for a copy of the repayment guaranty and review it carefully. Look for common ownership or control between the lender and guarantor. Any relationship between these parties creates a conflict of interests and weakens the guaranty.

Also ask for a proof that the guarantor’s assets are sufficient to cover the loan. If the regional center is not willing to show you financial statements that validate what they say about the guarantor, this is cause for concern.

A repayment guaranty from a strong, independent company with diversified assets can significantly reduce the financial risk to EB-5 investors. But even with an excellent repayment guaranty, the EB-5 loan, and thus EB-5 investors, are still subject to financial risk. No EB-5 project can be 100% risk free.

EB5AN–Kolter Projects Are Best in Class and Offer Repayment Guaranties

If all other aspects of two projects were the same, would you choose the one with higher risk?


EB5AN is committed to providing investors with the highest quality, lowest risk EB-5 projects on the market today. Each of our best-in-class EB-5 offerings features a repayment guaranty from a well-capitalized and independent Kolter parent company. We have a 100% project success rate with USCIS.

We are also committed to transparency. We are happy to share our projects’ repayment guaranties and guarantor financial statements to interested EB-5 investors.

Ultimately, you should evaluate the facts of each project for yourself. After comparing multiple projects, you should select the project you believe is most likely to result in you obtaining a Green Card and a return of your capital.

If you have any questions or would like more information about our projects, please schedule a free call. We are happy to discuss how a repayment guaranty can lower your EB-5 investment risk.