What is an EB5 Visa? An EB5 visa is an immigrant visa that allows a foreign investor and their family to move to the U.S. after making a minimum investment of $800,000 in a Targeted Employment Area (TEA) or $1.05 million for areas outside the TEA.
One of the requirements to obtain an EB5 visa is that the funds are sourced or obtained through lawful means. The burden lies on the investor to show that their funds were lawfully obtained. They are also required to provide sufficient relevant evidence to show the path or trail of funds from the source.
The funds for the minimum investment can be sourced through salaries or wages, business profits, savings, inheritance, gifts, or loans.
What Is An EB5 Visa Loan?
A loan is defined as a form of debt incurred by a financial institution or an individual.
The EB-5 Visa loan refers to a loan made by a foreign investor to fund their EB5 application. There are two kinds of loans that can get you to qualify for an EB5 Visa: 1) an individual loan; and 2) a loan from an institution.
Although loans are considered a lawful and acceptable source for EB-5 Visa funding, they must be secured by the foreign investor’s property and not the EB-5 corporation. Moreover, the present market interest rate applies to a loan between friends or family.
What Are The Requirements For An EB5 Visa Loan?
There are 3 requirements for the loan to qualify as your EB-5 fund:
● The loan must be guaranteed by the EB5 investor’s assets. It is required that the asset value be equal to or greater than the loan amount. Moreover, the current market interest rate applies even if it is an individual loan. A mortgage, if used to secure the loan, must be documented or annotated in the government’s property records.
● The EB5 investor must be the primary borrower and fully responsible for the repayment of the loan. It is a must that the foreign investor be primarily and solely liable for the repayment of the loan, aside from the loan being in their name.
● The loan must be secured by the EB5 investor’s personal property. The investor is only allowed to use their personal property to secure the loan. They can’t use their stocks in the company as collateral or the assets of the EB5 corporation.
What Are The Borrowing Terms For An EB5 Visa Loan?
There are four borrowing terms that the EB5 investor must understand, which will help them understand the loan procedures and the costs involved. To help you, we have listed the borrowing terms below:
● The amount and duration of the loan, and the procedure for disbursement
● The repayment of the principal amount and the accrued interest, whether in monthly, quarterly, or annual terms
● The alternatives for the Job Creating Entity (JCE) to apply for an extension are subject to a higher interest rate or other additional extension fees.
● The origination point or fee that covers the processing of the loan
Generally, a loan is scheduled to mature after the United States Citizenship and Immigration Services (USCIS) has ruled on the Form I-829 petition of the investor.
What Are The Repayment Terms For An EB5 Visa Loan?
If you acquired a loan to fund your minimum investment, the loan must be repaid in 5 or more years because the EB5 financing is at risk until your Form I-829 is approved. It is required under the EB5 Visa program that the invested capital be totally "at-risk", which means payback is not assured.
The repayment terms for loans can either be short-term or long-term and we have highlighted their differences below:
Short-Term Loans
The USCIS hasn’t given any loan repayment conditions for loan-funded investments. It is best, however, to structure these loans so that the repayment is dependent on when your Form I-526 is approved.
Moreover, a loan that is used to fund your EB5 investment requires that you show documentary evidence confirming the lawful source of the funds as well as the lawful source of the assets used to secure the loan.
Additionally, the USCIS may request proof of the lawful source of cash used to repay the loan if such loan is repaid before your Form I-526 petition is approved. Once the petition is approved, however, you won’t be required to show the source of the cash.
Long-Term Loans
As with short-term loans, the USCIS hasn’t provided any loan repayment conditions for longer-term loans. Long-term loans don’t mean that your investment will not be considered an “at-risk” investment. To be considered "at-risk,” the capital must be susceptible to being lost.
What Is The Period For An EB5 Visa loan?
Generally, an EB5 Visa loan lasts for 5 years. The interest rate is determined and subject to the current market conditions and credit criteria at the time the loans are procured. At the execution of the contract or commitment letter, the lender will be asked to give a deposit for expenditures. The deposit will then be applied to the commitment fee upon closing, and the borrower’s deposit will be repaid, minus any expense, should the project fail to close.
A lot of EB5 investors are unaware of the possibilities open to them in terms of funding their EB5 investment, such as the inclusions and conditions of the loan. It is best for the investor to consult with an experienced EB5 financial advisor so they can be aware of the different options to fund their EB5 minimum investment.
How Do I Apply For An EB5 Visa Loan?
As we have said, it is important that your loan is secured if you are planning to use it to fund your EB5 minimum investment. This will prevent the adjudication officer from rejecting your application. When applying for a loan, here are some tips that you can follow to make sure that it is suitable for the requirements of an EB5 Visa:
● The loan must be secured with your own assets, and the value of these assets must be greater or the same amount as the loan.
● The loan must follow the current market rate for loans. There are financial institutions that unilaterally set the interest rates to be paid and charged on loans. However, they must consider their competition, the current market levels for a variety of interest rates, and the law and regulations.
● You, as the principal borrower, must be directly accountable for the repayment of the loan. As the EB5 investor, you must be the principal borrower of the loan, your name should appear on the loan contract, and you must be accountable for its repayment.
● The shares in your EB5 business or any of its assets must not be used as collateral for the loan. It is required that the loan be secured by your personal assets, as the USCIS will reject your application if it is secured by the EB5 business.
What Is The Applicable Interest Rate For An EB5 Visa Loan?
The interest rate refers to the amount charged to the borrower, calculated as a percentage of the principal loan amount. Generally, the loan interest rate is expressed annually.
The interest rate can be based on numerous factors, including the bank-to-client relationship and the risk level. It can also depend on the bank’s own cost of capital and other external factors. For example, the London Interbank Offered Rate (LIBOR) is an indicator of how the world’s leading banks charge each other for short-term loans and is used as a step in determining interest rates for loans.
Meanwhile, there are banks that offer loans for 75% of the value of the home of non-resident aliens. Called cash-out finance, this allows you to convert a portion of your home’s equity into cash, which you can use for your EB5 minimum investment. The adjustable rates for fully amortized loans that are 15 or 30 years are 3/1, 5/1, and 7/1. You can get up to a $750,000 loan with an interest rate of 4.5% for a $1 million house, and the loan can be applied to the EB5 minimum investment and other associated fees.
EB5 Visa Bank Loan
A completely collateralized bank loan can be beneficial for you. When applying for such, you must provide loan documents, evidence of your collateral, and proof of the lawful source of your banking loan for your EB5 petition. To secure the loan, you must use your own assets, and you must be directly accountable for its repayment. Additionally, you must show that the written loan contract is implemented correctly and secured for it to be legally binding in your country as well.
Obtaining a lawful source of funds and the process of the EB5 petition itself can be rigorous. Davies & Associates can help you with its highly skilled team of leading EB5 lawyers with different areas of specialization specially assigned to help you with all the requirements of an EB5 visa to help increase your chances of getting approved.
Conclusion
The EB5 presents the best benefits for an investor like you. First, you get to enter and tap into the world’s largest national economy, and second, you experience better opportunities by moving to the U.S. with your family. However, like other visas, the EB5 Visa has requirements, one of which is to make a minimum investment, depending on whether you are investing in a TEA or not. To satisfy this requirement, you have the option of procuring a loan.
What happens next after you get approved? Once your conditional green card is issued, you need to take into account your family’s healthcare, living costs, tax obligations, and insurance, among others. It is important to take one step at a time and don’t rush things before your move to the U.S.
