A loan for an EB-5 visa is one of the options for EB5 Visa funding. The investor can choose between getting an individual loan or a bank loan. An investor must have the three qualifications to qualify for an EB-5 loan. These are: first, have a net worth in excess of $900,000; second, have at least $400,000 in liquid assets prior to the loan application; and third, invest in EB-5 projects that have been pre-approved.
The investor must understand the loan terms before applying for an EB5 loan. This includes the loan borrowing terms: first, the amount and duration of the loan, as well as the procedure for disbursement; second, the repayment of principal and accrued interest in monthly, quarterly, or annual terms; third, the alternatives for the JCE to apply an extension in exchange for a higher interest rate or other extension fees; and fourth, the origination point or fee, which covers the expense of loan processing. The loan repayment terms are short-term loans and long-term. Loans must be repaid within five years or more because EB-5 financing is at risk until Form I-829 is approved. The EB-5 regulations require that all invested funds be entirely risky, so returns cannot be guaranteed.
What is EB-5 Visa Loan?
The EB-5 visa loan refers to a loan made by the petitioner to fund his or her EB5 application. There are 2 kinds of loans that qualify for the EB 5 fund: first, an individual loan; and second, a loan from an institution. The investor must comply with certain conditions, although loans are an acceptable source for EB-5 funding, The EB-5 loan must be secured by the investor’s property. The present market interest rate should apply even if the loan is between friends.
What Are the EB-5 Visa Loan Requirements?
The EB5 Visa program has 3 requirements for the loan to qualify as the investor’s EB 5 fund. The 3 EB-5 Visa loan requirements are: first, guaranteed by the EB5 investor’s assets, second, the investor must be the primary borrower and be fully responsible for its repayment; and third, it must be secured by the investor’s personal property. The 3 EB-5 Visa requirements for loans and their conditions are listed below.
- Guaranteed by the EB 5 investor’s assets. The asset value must be equal to or more than the loan amount. The market interest rate must apply even if it were an individual loan. The mortgage must be documented in the government’s property records.
- Must be the primary borrower on the loan and be fully responsible for its repayment. The loan must be under the investor’s name and he or she must be solely liable for repaying the loan.
- Secured by the investor’s personal property. The investor can ONLY use his personal property to secure the loan. The EB5 investor cannot use his ownership stocks in the company as collateral for the loan.
The investor must meet these loan requirements to obtain funds for his EB-5 Visa.
What are the EB-5 Visa Loan Borrowing Terms?
There are 4 EB5 Visa loan borrowing terms that the investor must understand. Knowing these loan borrowing terms will help the investor fully understand the loan procedures and the costs involved.
The 4 loan borrowing terms and their definitions and costs are listed below.
- Amount and duration of the loan, as well as the procedure for disbursement
- Repayment of principal and accrued interest in monthly, quarterly, or annual terms
- Alternatives for the JCE to apply for an extension in exchange for a higher interest rate or other extension fees
- Origination point or fee, which covers the expense of loan processing.
A loan is generally scheduled to mature after USCIS adjudicates the I-829 petitions of investors.
What are the EB-5 Visa Loan Repayment Terms?
Loans must be repaid in 5 or more years because EB-5 financing is at risk until the approval of Form I-829. EB-5 regulations demand that all invested money be totally risky, so payback cannot be assured. The EB-5 Visa loan repayment terms can either be short-term or long-term.
The definitions and conditions of these 2 loan repayment terms are listed below.
- Short-Term Loans: USCIS has not publicly stated any loan repayment conditions for investments funded by loans. However, it is best to structure these loans so that repayment is contingent when your I-526 petition is approved. A loan used for EB5 funding will require you to produce documents confirming the legal source of the lender’s funds and the legal source of the assets used as collateral for the loan. USCIS may request proof of the legal source of cash used to repay the loan if the loan is repaid before your I-526 petition is approved. You will not be required to demonstrate the source of cash once your I-526 petition is approved.
- Long-Term Loans: Similar to short-term loans, USCIS has neither issued regulations for the repayment nor specified a deadline for the repayment of longer-term loans. A longer repayment term is not an indication that your investment will lose its classification as an “at risk” investment. The EB-5 investor program compels immigrant investors to invest in a “high-risk” investment until the end of their two-year conditional residency. Neither redemption agreements insuring against loss nor contractual promises to reimburse cash can manage capital. For your capital to be “at risk,” it must be susceptible to being lost.
Your EB-5 investment is still considered “at risk” regardless of whether you used a short-term or long-term loan. Any capital that remains invested in a non-guaranteed investment during your conditional residency period will likely satisfy the “at risk” requirement of the EB-5 Visa program.
Who must be the EB-5 Loan’s Primary Borrower?
The investor must be the primary borrower of the EB-5 loan. The investor must have these 3 qualifications to be able to get a loan for his EB5 Visa investment.
The 3 qualifications that an EB5 Immigrant Investor must have are listed below.
- Must have a net worth in excess of $900,000
- Must have at least $400,000 in liquid assets prior to the loan application.
- Must invest in EB-5 projects that have been pre-approved.
How Long Does It Take to Get an EB-5 Loan by Refinancing a Property?
Foreign investors may remortgage (refinance) using a mortgage with a fixed or variable interest rate. Adjustable rates for 15 or 30-year fully amortized loans are 3/1, 5/1, and 7/1. An EB-5 investor can get up to $750,000 at an interest rate of around 4.5% with a $1 million residence. Typically, the bank can determine if a house or condominium qualifies for a cash-out refinance within 72 hours. The loan proceeds can reach the investor’s account within 45 days, subject to the appraisal and lending review processes.
How Long Does an EB-5 Visa Loan Last?
An EB-5 visa loan term is usually five (5) years. The interest rate on the loan is determined based on market conditions and credit criteria. Upon execution of the commitment letter, the lender will be asked to give a deposit for expenditures. The deposit will be applied to the commitment fee upon closing. The borrower’s deposit will be repaid, less any expenses, if the project fails to close. Many potential EB-5 investors are unaware of the possibilities open to them, including who can give financing, what is included in the loan, and under what conditions. It is advantageous for the investor to consult a trusted EB-5 financial advisor on the various EB5 funding options.
How Do I Apply for an EB-5 Loan as an Investor?
It is important that the loan is secured if you plan to use an EB-5 loan for EB5 funding. This will prevent the United States Citizenship and Immigration Services (USCIS) from rejecting your application. Follow these tips to apply for a loan for an EB-5 visa.
- Secure the loan using your own assets: The value of the asset must be greater than or the same as the loan amount.
- Must follow the current market rate for loans: Banks are typically free to set the interest rates to pay on deposits and charge on loans. However, banks must consider competition, the market levels for a variety of interest rates, and Federal Reserve regulations.
- Must be the principal borrower and must be directly accountable for the loan repayment: The investor must be the main borrower, with his name appearing on the loan contract, and must be completely accountable for paying the loan.
- Must not use your shares in the EB-5 investment company or any of the EB-5 investment company assets as collateral for the loan: The loan must be secured by the investor’s assets only. A loan secured by the investor’s shares in the new EB5 enterprise or by the company’s assets is not acceptable and will be rejected by the USCIS.
What is the EB-5 Visa Loan Used For by an Investor?
EB-5 loans are used for the EB-5 fund. Loans are one of the acceptable funds an investor can use for the required capital investment. The applicant must provide supporting documents to prove the legal source of the loan; show how the lender earned the funds; and how the funds were transferred from the lender to the EB-5 investor.
How Much is the EB-5 Visa Loan Interest Rate for an Investor?
The loan interest rate refers to the amount charged by the lender to the borrower, which is calculated as a percentage of the loan’s principal. Typically, the interest rate on a loan is expressed annually as the annual percentage rate (APR). The EB-5 visa loan interest rate is based on credit requirements and market conditions. Adjustable rates for 15 or 30-year fully amortized loans are 3/1, 5/1, and 7/1. An EB-5 investor can get a loan of up to $750,000 at an interest rate of around 4.5% for a $1 million house. The $750,000 can then be applied to the EB-5 investment and associated fees.
Is an EB-5 Visa Loan an Acceptable Source of Capital?
Yes, Loans are an acceptable source for the EB5 fund. The investor petitioner must submit proof that the loans and assets were procured legally. The petitioner must provide evidence that the lender’s funds were of legal source for an individual loan. It is necessary for the applicant to follow the set rules of the EB-5 source of funds requirements.
Is a Bank Loan Beneficial for an EB-5 Visa Applicant?
Yes, a completely collateralized bank loan is beneficial for an EB-5 Visa applicant. You must provide the loan documentation, evidence of your collateral, and proof of the funding source when using a bank loan for your EB5 Visa application. You must use your own assets to secure the loan, be directly accountable for the loan, demonstrate that the written loan contract has been implemented correctly and secured in order for it to be legal in your own country; and provide proof of the full source of funds.
Consultation with a competent EB-5 financial advisor and an immigration attorney is necessary for the proper completion of this procedure. Knowledge of what EB-5 financing is will make it easier for the investor to generate the required capital investment.
What Kinds of Covenants are Commonly Included in EB-5 Loan Agreements?
Covenants are intended to protect the investment of EB-5 Lenders over the life of the EB-5 Loan by monitoring the operations of the EB-5 Borrowers, restricting certain actions that EB-5 Borrowers can take, and requiring other actions to be taken. There are 2 categories of covenants commonly found in EB-5 Loan agreements.
The 2 covenants included in EB-5 Loan Agreements and their descriptions are listed below.
- Affirmative covenants: require the job-creating entity (JCE) to accomplish the activities listed below.
a. Provide unaudited financial accounts
b. Maintain insurance as required
c. Pay taxes
d. Allow the EB-5 lender to check the project and records and books
e. Notify lenders of any significant shift or change to the business
f. Produce a minimum capital investment
g. Meet the job creation and other EB-5 program conditions. - Negative covenants: require the written consent of the EB-5 Lender to do any of the activities listed below.
a. Incur additional debt
b. Pledge additional collateral
c. Pay dividends
d. Sell certain assets
e. Make substantial changes to the business plan or project
f. Enter into substantial agreements
g. Hire executive-level personnel
What is the Minimum Loan Amount Requirement to qualify as an EB-5 Regional Center?
The minimum loan amount for an entity to be a regional center is $10,000,000. As defined by an economic impact model, projects must generate at least 10 new direct and indirect jobs for every $800,000 loan in order to qualify.
The EB-5 loan regional office provides a mezzanine loan of around $30 to $35 million, while the borrower-developer contributes $10 to $15 million in cash and equity. Smaller EB-5 loans have been made in less populous states, sometimes as low as $10 million.