The EB-5 Immigrant Investor Program offers a pathway to U.S. permanent residency for foreign nationals who invest in a U.S. business or project that creates jobs for Americans. Because the investment threshold is significant (currently $1,050,000, or $800,000 in targeted employment areas), many potential EB-5 investors may not have the full amount of capital readily available.
In such cases, securing a loan can be an appealing way to finance the required investment.
However, there are important nuances and rules around how loans can be used in an EB-5 investment. This article will clarify the types of loans available to EB-5 investors and the legal parameters that govern them.
HELOC Loans Against Home Equity
Unsecured Loans
Loans From Licensed Financial Institutions
Loans From Non-Relative Lenders
Securing a Loan Against the EB-5 Investment
EB5AN Can Help You Navigate Loan Options
HELOC Loans Against Home Equity
One of the most common ways for EB-5 investors to raise capital is by taking out a home equity line of credit (HELOC) against their existing property. A HELOC allows you to borrow against the equity you’ve built up in your home or other real estate.
The primary advantage of a HELOC is that it typically offers relatively low interest rates compared to unsecured loans, making it an attractive option for many investors.
In an EB-5 context, a HELOC can be used to fund your EB-5 investment, but there are certain conditions that must be met.
The money used for the EB-5 investment must be legally sourced. If you are borrowing against your home, the funds you use to make the investment must come from the loan proceeds.
To prove this, you will need to document the loan agreement, the terms, and any interest payments—as well as provide documentation showing the funds you originally used to purchase the property were legally sourced.
Also, the loan cannot be secured against the EB-5 investment itself. This means that while you can take out a loan against your home’s equity to fund the EB-5 investment, you cannot use the investment project itself as collateral for the loan.
The loan must be repayable under reasonable terms. U.S. Citizenship and Immigration Services (USCIS) is strict about ensuring that any loans used for EB-5 purposes are legitimate and structured in a way that does not violate the program’s regulations.
In short, HELOCs are a viable option, but investors must ensure that they are fully transparent about the loan terms and ensure they can repay it.
Unsecured Loans
An unsecured loan is a loan that is not backed by any collateral, meaning there is no asset (like a home or business) securing the loan.
For many EB-5 investors, unsecured loans have become a more appealing financing option, especially after the landmark Zhang decision. The decision shifted the landscape by allowing the use of unsecured loans in certain circumstances.
While the Zhang decision clarified that EB-5 investors can use unsecured loans for their investment, the following conditions still apply.
Source of Loan Funds
Although the loan itself doesn’t require collateral, USCIS still requires that the source of the loan funds be legal and transparent. This means that the lender must be able to demonstrate that the money they are lending comes from legitimate sources, whether through their own business or other financial activities.
Additionally, the required investment capital must remain at risk for the purpose of generating a return, even though a return is not guaranteed. The Zhang decision made it easier to utilize unsecured loans, but investors must still meet USCIS standards for transparency and repayment feasibility.
Loans From Licensed Financial Institutions
Loans from licensed financial institutions, such as banks or credit unions, are another option for EB-5 investors.
One of the key benefits of these loans is that, unlike loans from friends or relatives, they don’t require as much documentation regarding the source of funds from the lender. This is because licensed financial institutions are regulated and their lending practices are subject to strict oversight, which offers a degree of reassurance to USCIS.
However, there are important considerations to account for when using such loans.
Unsecured Loan
Similar to other loans, this cannot be secured by the EB-5 investment itself.
Loan Documentation
While loans from licensed institutions typically don’t require detailed information about the lender’s financial history, the borrower must still demonstrate the legitimacy of the loan and its use for the EB-5 investment.
To prove this, you will need to submit the loan agreement, proof of repayment ability, and evidence that the funds are being used in compliance with EB-5 requirements.
Terms and Conditions
The loan must be structured in a way that allows for reasonable repayment. In other words, USCIS will want to ensure that the investor has the financial capacity to repay the loan without it impeding the creation of jobs or the long-term success of the EB-5 project.
Using a loan from a licensed financial institution can streamline the EB-5 process, particularly when it comes to USCIS’s source of funds requirements, but it’s still important to ensure that the loan is properly structured and documented.
Loans From Non-Relative Lenders
If the lender is not a close relative, USCIS scrutinizes the loan more carefully.
The key challenge here is to establish a strong case for why the lender is willing to provide a large amount of capital. While family members may be presumed to have a more natural relationship with the investor (and thus are more likely to provide financial assistance), non-relatives may need to justify the loan more thoroughly.
As part of its increased scrutiny, USCIS focuses on several key factors.
Business Relationship
If the lender is a business partner, investor, or has a close professional relationship with the EB-5 investor, this can help establish the legitimacy of the loan.
Loan Agreement
As with any loan, the agreement should be carefully structured and include terms for repayment.
If the lender is not a relative, providing additional context about the business or otherwise long-standing relationship or rationale for the loan may help strengthen your case.
Legal Documentation
Full disclosure and documentation will be key to ensuring that USCIS doesn’t mistake the loan for a gift, which has different requirements to be used for an EB-5 investment.
While loans from non-relatives can be used, they require a more detailed explanation and clear documentation to avoid complications during the EB-5 process.
Securing a Loan Against the EB-5 Investment
It’s crucial to understand that no loan can be secured against the EB-5 investment itself. In other words, you cannot borrow money using your EB-5 investment project as collateral. The loan must be unsecured or secured against another asset (such as your home or business).
This rule is in place to ensure that the investment is truly at risk and that the investor has a genuine stake in the success of the EB-5 project. It also prevents the potential for fraud or manipulation of the program.
EB5AN Can Help You Navigate Loan Options
Understanding the loan options available for EB-5 investors is essential for making an informed decision about financing your investment.
Whether you are considering a HELOC, an unsecured loan, a loan from a licensed financial institution, or a loan from an individual, it’s important to ensure that the loan is legitimate, properly documented, and does not violate USCIS guidelines—otherwise, you may jeopardize your EB-5 application.
By understanding the rules and ensuring transparency in your financial dealings—including by partnering with an experienced immigration attorney and expert EB-5 team like EB5AN—you can make the most of the available financing options while protecting your pathway to U.S. residency.
If you would like to know more about using loans for your EB-5 investment, book a free call with our expert team today.
