A core principle of the EB-5 Immigrant Investor Program is that all investment funds must have a lawful origin. The source of an EB-5 investor’s funds must be clearly documented and legally obtained. The program allows for various ways to finance the required $800,000 investment, including using loaned funds from sources such as a bank, family, or friends, depending on the individual case. This approach is acceptable under EB-5 guidelines, as long as two key conditions are met- the investor must show that the loan funds themselves are lawfully sourced, and they must be personally liable for repaying the loan.
Bank Loans Offer Strong Credibility
USCIS often sees loans from banks and other traditional lenders as more credible. They tend to be well-documented, clearly structured, and are sometimes backed by collateral like real estate, stocks, or other personal assets. To use a bank loan for an EB-5 investment, an investor needs to provide a signed loan agreement, proof the funds were disbursed, details of the repayment terms, and evidence that the collateral used to secure the loan was obtained legally, such as a purchase agreement, personal bank statements, and tax returns.
Unsecured Loans Can Be Simpler
Unsecured loans, which are not backed by collateral, are also allowed under EB-5 and can be even more straightforward since there’s no need to trace the lawful source of collateral. The only evidence required is the loan agreement, proof of the disbursement of funds, and proof that the investor is personally responsible for repayment.
Family and Friend Loans Can Face More Scrutiny
In contrast, loans from family members or friends, while permitted, can be subject to higher scrutiny. USCIS requires a formal, signed loan agreement establishing clear repayment terms and confirming the investor’s personal liability. The lender’s source of funds must also be thoroughly documented and sourced to show the funds were legally obtained. This means the family member or friend must prove the lawful origin of the money they are lending by providing personal tax returns, bank statements, or business bank statements and tax returns, for example. Without supporting financial documentation from the lender, USCIS may view the loan as a gift or question its legitimacy, potentially risking the approval of the petition.
Key Differences Depend on the Lender
Ultimately, the key difference between these types of loans lies in who the lender is. When the loan comes from a regulated institution like a bank, the documentation is more standardized and could be easier for USCIS to assess. On the other hand, loans from private individuals require much more detailed documentation to verify the lender’s lawful source of funds. Understanding this distinction can help investors better prepare a complete and credible explanation of the EB-5 source of funds for their petition.
If you have any questions regarding EB-5’s source of funds, please email us at rpatel@patellegal.com and jtrevino@patellegal.com.