Unsecured Loans as a Viable Source of EB-5 Funds

Posted on Nov 12, 2023 by Jacqueline Trevino

Legal Precedent: Zhang v. USCIS (2020)

Traditionally, USCIS has treated unsecured loans as unviable sources of EB-5 funds. The U.S. Court of Appeals for the D.C. Circuit, however, changed the landscape of the EB-5 program in 2020 when it concluded in Zhang v. USCIS, 978 F. 3d 1314, 1319-22 (D.C. Cir. 2020) that loan proceeds invested into an NCE are indeed considered “cash,” rather than “indebtedness,” as per 8 C.F.R. §. 204.6(e)’s definition of “capital.” Under the regulations, “indebtedness” must be “secured by assets owned by the alien investor,” but “cash” need not be.

Case Background: Zhang and Hagiwara’s Petitions

In 2013, Huashan Zhang and Masayuki Hagiwara borrowed funds from each of their own businesses and invested the proceeds into an NCE. In 2015, USCIS denied their petitions for EB-5 visas, reasoning the loan proceeds invested by the petitioners were not secured by either of their assets, and such investments “did not satisfy the regulatory requirements for “indebtedness” to qualify as capital” under 8. C.F.R § 204.6(e). Id.

Legal Interpretation: Defining “Cash” in EB-5 Investments

The 2020 ruling clarified that proceeds from unsecured loans are considered “cash” and need not be secured by personal assets as would “indebtedness.” The Court of Appeals explained, “Cash is fungible, and it passes from buyer to seller without imposing on the seller any of the buyer’s obligations to his own creditors. The buyer’s source of cash—whether paycheck, gift, or loan— makes no legal or practical difference. Here, when Zhang and Hagiwara took out loans from their companies, they received cash proceeds. And when they invested the proceeds into the Nevada enterprises, they gave and the enterprises received cash, plain and simple, regardless of how it was obtained.” Id.

Compliance and Integrity: Implications of the RIA

Although Zhang provides more opportunities to participate in the EB-5 program, it is crucial to note that the capital investment requirement cannot be met unless the funds were provided to the investor in good faith and not to bypass the program’s restrictions on the sources of capital. (PL 117-103, Part 2(L)(iii)(I)(aa),(bb)). The intention behind this requirement, which became effective when the EB-5 Reform and Integrity Act of 2022 (RIA) was signed into law, is to ensure the legitimacy and lawful origin of the investor’s funds, preventing any involvement with proceeds from illegal activities. Id.


Zhang, along with RIA’s new good faith requirement, underscores the program’s commitment to promoting genuine investment, economic growth, and the integrity of the immigration process.

To read the entire Zhang decision, click here:  If you have any questions regarding the EB-5 process, please email us at rpatel@patellegal.com and jtrevino@patellegal.com.