A Guide To EB-5 Financing

by | Jun 28, 2021 | blog, blogs | 0 comments

EB5 visa projects are one of the most popular ways to get your American citizenship through lawful means. However, since it requires a considerable amount of EB5 funding and entrepreneurship skills, you must make mindful decisions.

This article revolves around the intricacies of EB5 funding projects to help you make the best decision regarding business ventures while busting the misinformation. Keep reading further to know more.

What Is EB5 Funding?

EB5 funding is the process of raising a certain amount or more for initiating a business venture. The US government explicitly applies this principle to stimulate the American economy and creating more employment opportunities (10 full-time relevant jobs) through foreign investors.

With an EB5 funding project, you will need to invest a minimum of US $1 million or the US $500,000 in a new commercial enterprise or a regional center project involving the TEA. On meeting the minimum eligibility criteria for the business, you will get a green card for you and your dependents.

There are two ways to invest the EB-5 money in a project-

A. Direct investments with EB5 funding– If you are considering the direct investment, you will directly invest the funds through the developer, not a regional center. For this, you will need to file the I-526 petition along with a solid business plan. The job requirements are strict, and you will need to manage the project actively. It is hard for overseas investors to get involved in a Direct EB-5 project in the US.

B. EB 5 financing with regional center investments– EB 5 projects are usually financed through the regional centers that accept investments from the EB5 foreign entrepreneurs. 

Every year, 10k green cards are issued by USCIS officials for foreign investors interested in stimulating the American economy through designated regional centers.

For this, the project developer and the Regional center will need to file the application I-924 detailing the scope and impact of the regional center project with USCIS. Then, on fulfilling the eligibility criteria in upcoming years, you can get your green card. 

If you have decided to go through the EB 5 financing regional center route, choosing an approved existing USCIS-designated regional center would be your best bet.

Understanding EB 5 Funding Program Requirements

Apart from the pre-requisite of an EB-5 capital funding project, your will need to prove that you have lawfully obtained the EB-5 money for the EB5 visa program. Here is how it is done: – 

A. Documentations and eligible sources of EB 5 funding program 

Here is the list of documents that you will need to produce-

  1. Bank statements– Bank statements of the previous three years with submission and transfer of funds from one account to another explained through the supporting letters.
  2. Real estate assets– This includes the lease, mortgage, appraisal bank loan, etc., documents associated with real estate.
  3. Business ventures– The applicant must provide the records proving the partnership and ownership of the business registration records. It will also include the accountant’s appraisal for all businesses where the individual owns the business.
  4. Investments– This includes the documents involving the stocks, capital investments, security investments, with the supporting documents providing proof of significant capital gain before three years.
  5. Other valid sources of EB 5 capital funding– The alternative source of EB 5 financing includes employments proof, inheritance, gifts, divorce, and previous legal proceedings. 

B. Third-party source of investments- Investor loans

If the EB 5 loans are acquired from a third party, e.g., Banks, the applicant must add the proof for the same as well. Also, you will need to show the collateral used against this loan.

Apart from the source of EB-5 funds, you will also require to produce the following documents-

  • Business registration records
  • Tax records or similar records filed within the previous five year period, including the personal, partnership, or corporate records)
  • Certified copy of court judgments, preceding civil or criminal court cases within or outside of USA in last 15 years
  • Any other source for capital showing the legality through which the EB5 money was obtained. 

At any point in time, if you fail to produce the documents due to any reason, you can file a declaration explaining the lack of records in detail. If the reasons are valid, USCIS will accept your application.

Structuring The EB 5 Loan Agreement Terms

Selecting and understanding the terms and conditions of EB 5 loans requires critical evaluation. When you enter the loan agreement, you need to analyze if the project will be able to create ten job opportunities for US citizens or it will be able to generate sufficient revenue to pay back the loan on time.

EB 5 loan agreement is signed between job-creating enterprise (JCE), applicant, and regional center/new commercial enterprise (NCE). The JCE will have its terms and conditions for entering the contract, including allotting the materiality threshold for unexpected events, the grace period for loan payment, etc.

Here is the outline for EB 5 loan agreement. It must consist of- 

  • Definition and explanation of key terms in the first section
  • The second section involving the borrowing terms, including 
  1. the amount and term of the loan and the procedure for disbursement;
  2. the terms for repayment of the principal and accrued interest on a monthly, quarterly, or annual basis;
  3. any options for the JCE to exercise an extension in return for an increased interest rate or other extension fees; and
  4. the origination fee, which covers the cost of processing the loan. A loan is typically set to mature following the adjudication of investors’ I-829 petitions by USCIS.
  • The third section includes the condition of closing, implying the fulfilment of initial conditions laid out in the contract before the advancement of the first EB 5 loan payment.
  • The fourth section may contain the representation, warranties, and covenants made by JCE to minimize the risks for NCE and investors. For example, there could be an affirmative covenant and a negative covenant included in the EB5 loan agreements.
  • The agreement may also contain the default section proposing the circumstances in which the EB 5 loan amount will default.

The Flow Of Funds In EB 5 Loan- How Does EB5 Financing Works?

As per the EB-5 agreements signed for the project, the loan amount will be transferred according to the steps outlined below-

  1. The regional center will act as a manager for NCE to attract the marketers and other agents to secure the foreign investor for the project. In addition, the experienced and legitimate regional center will ensure that the loan complies with the requirements of the EB-5 program.
  2. The EB 5 investor will invest in the project. The amount is transferred to the escrow account until it is released to the JCE. The applicant will also make other transactions for the processing fee other than the EB5 money.
  3. The regional center will then allot the funds to the JCE as required for the project. Both will agree on the terms and conditions associated with the loan and repayment within the contract on which the guarantees will be reflected.
  4. If required, the JCE might draw a small loan for the project’s initial development before the funds can be dispersed from the escrow account. In addition, at times, the EB5 loan payment may be subordinated to pay the senior lenders in the projects as per the agreement. 

How To Get EB 5 Funding?

The popularity of EB 5 has benefitted both the applicant and the American economy. If you want to have your chance at EB 5 visa, but lack the investment, here is how you can attain your goal and get the EB 5 capital funding-

  1. Do your research and create a marketing campaign that highlights the positive points of your project.
  2. Create transparency and explain the potential risks and benefits associated with the project.
  3. Do your homework and answer the questions put up by people around you in the most convenient manner while putting their doubts to rest.
  4. Consider achieving your dream through the regional center.
  5. Create a job buffer for the investors so that your investors do not lose their green card for the lack of meeting the job condition for a US citizen.
  6. Apply for the exemplar status of your project, which is a vote of confidence of the US govt on your approved project and offers more credibility for the investors.
  7. Instead of putting your investment at risk, it is advised to contact the EB 5 visa law firm experts to get the job done and tie any loose ends.

The Common Misconceptions With EB 5 Projects

Eb-5 Money Is Just An immigration Project

Considering EB-5 projects as an immigration project can create a blind spot for the hurdles involves in their EB-5 process. EB 5 is a security project and should be regulated as such where you get the rewards only if you meet the eligibility criteria. As it involves multiple complex features, it is recommended to hire an attorney.

EB-5 Money Can Be Recovered Quickly

EB-5 money is processed slowly in terms of project investment and the returns of disbursement in accordance with maturity time. This implies you can not be assured that you will get fixed returns even after five years of investment. You are likely to pay back loans and use the profits for reinvestment in the initial periods. This is likely to increase your waiting period to reap the returns on your investments.

EB-5 Money Is Free Money

Most of the EB 5 projects can be loaned upon with low interest rates making it an attractive financing option. However, there are other fees that you need to pay that can complicate the matter, such as foreign transferring funds across the borders, high attorney fees, etc., making it a relatively cheaper but definitely not a free money option. 

EB-5 Projects Are Full Of Fraud 

While there have been some instances of fraud, EB 5 visa program is still one of the most reliable and quick ways to get your citizenship. There have been countless success stories associated with EB 5 visa, which makes it a sustainable capital program in the long run.
EB 5 project requires careful planning and precision to turn successful. However, with several EB 5 financing options opened for investment, many countries are going through EB5 visa backlogs. Now that you know the basics of EB 5 funding and requirements, just get in touch with your EB5 visa attorney to check your eligibility criteria.



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