Venture capital raised in the United States cannot be used to fund an EB-5 investment because the capital invested must belong to the investor. Venture capital belongs to the business in which it was invested, so whatever the EB-5 investor’s role in that business, the business still owns the capital. However, income earned in the United States can be used for an EB-5 investment if the investor legally earned the income. Investors can also use numerous other sources of investment funds, including gifts, inherited funds, the proceeds of investments and asset sales, loans, and business revenue.
Two key requirements apply to EB-5 investment funds: the investor must be the legal owner of the capital, and the investor must have obtained the capital legally. The United States Citizenship and Immigration Services (USCIS) Policy Manual also provides a definition of capital in the context of the EB-5 program:
Capital includes cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets owned by the immigrant investor, provided the immigrant investor is personally and primarily liable and that the assets of the new commercial enterprise upon which the petition is based are not used to secure any of the indebtedness.
Thus, investors have a range of options when it comes to EB-5 visa investments, but venture capital does not qualify due to the ownership requirement.
Choosing the right funds for an EB-5 visa investment can be challenging. Beyond using funds that meet the program requirements, some funds are easier than others to document. Keeping the documentation supporting the I-526E petition as simple as possible is useful because it makes it easier for the adjudicator to see that the investment and investor meet the EB-5 program criteria.
To increase the likelihood of success when submitting Form I-526E, investors should begin working with experienced EB-5 immigration counsel as soon as they decide to pursue an EB-5 visa. An immigration attorney will be able to advise the investor on the simplest source and path of funds before the investor begins to transfer and gather funds, vastly simplifying the EB-5 process.
