The EB-5 Immigrant Investor Program is a popular residency-by-investment program of the United States, which enables foreign nationals to obtain a Green Card by investing in a U.S. business venture. Created by the U.S. Congress in 1990, the program is designed to stimulate economic growth and generate employment in the United States through foreign investment. It is administered by the federal agency United States Citizenship and Immigration Services (USCIS).
The EB-5 visa offers investors and their eligible family members (the spouse and unmarried children under 21) lawful permanent residency in the United States and paves the way for U.S. citizenship, if they meet the eligibility criteria of the EB-5 program.
To qualify for the EB-5 visa, foreign nationals must invest a minimum capital amount in a new commercial enterprise, and the investment must create at least 10 permanent full-time jobs for qualified U.S. workers. The threshold investment capital is $1,050,000 for standard EB-5 projects and $800,000 for projects in designated targeted employment areas (TEAs).
Due to the substantial investment amount, the EB-5 visa is often perceived as the “million-dollar visa” that provides fast-track Green Cards to wealthy investors. The hefty capital requirement can seem daunting to foreign nationals seeking permanent residency in the United States if their net worth is less than a million dollars. However, the reality is that one does not necessarily have to be a millionaire to participate in the EB-5 program.
In this article, we will discuss how foreign investors can apply for the EB-5 visa even if they do not have the required funds on hand and explore their options for meeting the program’s investment criteria.
Source-of-Funds Requirement for EB-5 Capital
Common Sources of EB-5 Funds
Partial Investment Option
EB5AN Can Help You With Your EB-5 Investment
Source-of-Funds Requirement for EB-5 Capital
A key requirement for EB-5 investors is that their capital must be traceable and lawfully sourced. Failure to meet this condition may cause the outright denial of an investor’s petition. This is the reason why it becomes extremely important for investors to understand the legitimate sources of capital they can use to fund their EB-5 investment.
One of the most common sources for EB-5 investment funds is the regular income of an investor, such as their salary from employment or profits from a business. Although this is the most feasible way to save for an EB-5 investment, investors’ primary earnings are often insufficient to meet the threshold investment criteria, and they need to explore alternate sources to arrange the funds.
Common Sources of EB-5 Funds
Besides the savings from the primary income, there are many other sources investors can draw funds from to meet the minimum investment requirement of the EB-5 program. EB-5 applicants can combine capital from gifts, inheritance, loans, property sales, market investments, etc., as long as they can provide the necessary documentation to prove the legal path and origin of the funds when they file their EB-5 petition (Form I-526E).
Let’s discuss these sources in a little more detail.
Gifts and Inheritance
Gifted capital is a perfectly acceptable source of EB-5 investment funds, if its legal origin can be proved with enough documentary evidence. The donor and the investor must sign a declaration stating that the gift is “irrevocable” and that the recipient doesn’t need to repay it.
If the investor receives the gifted capital from immediate family members, especially parents, the documentation is relatively easy and straightforward. Often, the investor will only need to prove that the family member gifting the money has filed the necessary tax returns on the lawfully sourced funds.
However, gifts from friends or business associates may require additional proof to establish the legitimacy of the gift. In such cases, tax compliance and thorough documentation of the donor’s source of funds are needed. The donor will also have to establish a longstanding relationship with the investor and the reasons for donating the money.
If inheritance is used for an EB-5 investment, the investor must provide evidence such as wills, court orders, documents from an estate administrator, etc., demonstrating that they received the inheritance. The investor must also prove their relationship with the person who left the inheritance and their right to receive it.
Loans
Loans are a good source of funds if the investor can demonstrate their ability to repay the loan. Even if they do not possess sufficient funds for the investment but have a substantial and steady income, investors can take a loan from an institutional lender or a private individual to source EB-5 capital.
In the case of secured loans, the entire loan must be secured by the personal assets of the investor, and it must be proved that the assets were sourced legally.
If the loan has been secured from an individual lender, then sufficient documentation must be provided to demonstrate that the lender has obtained the funds lawfully and in compliance with tax regulations. The terms of the loan from a private party must be comparable to a commercial bank loan.
Unsecured loans can also be used to fund EB-5 investments as long as the source of funds and supporting evidence are provided.
Any loan contract must explain the terms of the loan, including the interest rate and the deadline for repayment. Loan repayments must also be traceable and on terms consistent with market standards.
Sale of Property
EB-5 investors commonly use proceeds from the sale of a property to fund their EB-5 investment. Regardless of whether the property was inherited or bought by the investor, it must be proved that the property was legally obtained. If the property was purchased by the investor, they will have to demonstrate how the funds used to buy the property were acquired.
The investor will need to provide the complete sale and purchase documentation, including bank statements showing the transfer of funds to the investor’s account. They must also include the ownership certificate and tax records of the property as evidence of regulatory compliance.
Partial Investment Option
USCIS allows applicants to file the EB-5 petition by making a partial investment and committing to investing the remaining amount within a given timeframe.
This is a viable option for investors facing limited liquidity potential as it gives them flexibility and additional time to arrange the balance payment. It allows investors to capture an early priority date while giving them more time to liquidate their investments at a better rate.
However, investors seeking the partial investment option must find projects with regional centers that offer them this flexibility. As more developers and regional centers are starting to accept payment in installments, EB-5 investors can make use of this opportunity to begin their EB-5 process with partial EB-5 capital while they gain access to the remaining funds.
To participate in the EB-5 program through a regional center, an EB-5 investor must be accredited, meaning they must meet one of the following criteria:
- The investor, either individually or jointly (with a spouse), must have a net worth of $1 million, excluding the value of a primary residence.
- They should have earned an individual income of $200,000 or a spousal joint income of $300,000 for the past two consecutive years and expect to earn the same or higher income, individually or jointly, for the present year.
With the second option, even if the investor does not have a net worth of $1 million, they can still invest in a regional center project by meeting the net annual income requirement.
EB5AN Can Help You With Your EB-5 Investment
The EB-5 investment program presents a unique opportunity for foreign nationals to obtain U.S. permanent residency. However, arranging and documenting the required investment amount can be challenging for applicants.
If you’re considering an EB-5 investment but are worried about meeting the funds requirement, EB5AN can guide you in sourcing your EB-5 capital.
EB5AN has helped more than 2,300 families from 60 countries relocate to the United States as lawful permanent residents. Our expert team has more than a decade of experience and offers clients first-rate, low-risk EB-5 regional center projects with a 100% USCIS project approval rate.
To hear about the real-life success stories of EB-5 investors, check out our testimonials.
If you’d like to know more about EB-5 investments, book a free call with our expert team today.
