EB-5 Source of Funds from Loans

Current USCIS forms expressly list loan proceeds, including mortgage proceeds, as a potential source.

Loan proceeds can qualify as EB-5 capital when the investor lawfully obtains the borrowed funds and the transaction otherwise satisfies the capital and lawful source rules. Current Form I-526 instructions expressly recognize loan and mortgage proceeds as potential sources. The petition should document the borrowing, disbursement, investor's receipt or control of the proceeds, and the later transfer into the EB-5 investment. Loan proceeds should be distinguished from a prohibited debt arrangement between the investor and the new commercial enterprise. The fact that money was borrowed does not itself disqualify it, but the legal structure and source of the borrowed funds must be clear.

The loan must be genuine and cannot be structured to circumvent source-of-funds restrictions.

The Reform and Integrity Act expressly requires borrowed funds to be provided in good faith and not used to circumvent restrictions on permissible sources of capital. The loan should therefore reflect a real debtor creditor relationship rather than a circular or artificial transaction created solely to manufacture an apparent source. The agreement, repayment terms, disbursement, collateral if any, and actual conduct should be consistent. A family or related party loan can still qualify, but it often requires more documentation because the parties may control both sides of the transaction and USCIS must be able to determine that the borrowing is genuine.

The statute specifically requires the donor or a lender other than a bank to provide the applicable lawful-source records.

A conventional regulated bank loan can therefore present a different evidentiary record from a private lender.

A conventional bank loan usually presents a different source record from a private loan because INA section 203(b)(5)(L) specifically requires donor or nonbank lender source records. Bank loan evidence can include the executed loan agreement, approval, mortgage or security documents, disbursement records, account statements, and proof that the proceeds reached the investor. The investor should also explain any restrictions on the use of proceeds. Although bank status can reduce the need to prove the bank's own source of funds, it does not eliminate the need to document the loan itself, the investor's receipt, and the complete path into the EB-5 investment.

Family, friends, companies, or other private lenders may need tax, business, asset, judgment, and other source records required by current law.

When the lender is a person or entity other than a bank, current law requires source records from that lender as applicable. A parent, friend, business, trust, or other private lender may therefore need tax, business, asset, judgment, banking, or transaction evidence showing that the lender lawfully owned the money loaned. The investor must also document the bona fide loan terms and path of the proceeds. If the lender's money came from a separate property sale, business distribution, gift, or another loan, the filing should trace that source as needed rather than stopping at the private lender's outgoing transfer.

Current law excludes capital invested in exchange for a note, bond, convertible debt, obligation, or other debt arrangement between the investor and the NCE.

Borrowed funds should not be confused with capital invested in exchange for a prohibited debt arrangement with the new commercial enterprise. INA section 203(b)(5) excludes capital invested in exchange for a note, bond, convertible debt, obligation, or other debt arrangement between the investor and the NCE. It also excludes certain contractual repayment rights and guaranteed returns. The petition should therefore review both sides of the transaction: the investor may lawfully borrow money from an outside lender, but the investor's interest in the NCE still must constitute qualifying at risk capital rather than a creditor relationship that the statute excludes.

• Loan agreement
• Bank approval
• Mortgage documents
• Collateral records
• Disbursement records
• Borrower bank statements
• Nonbank lender source records
• Transfer records

A loan based source package should document the lender, agreement, disbursement, investor's receipt, lawful source where required, and final EB-5 transfer. Useful exhibits can include the loan agreement, bank approval, mortgage or collateral documents, lender identification, nonbank lender tax and source records, borrower bank statements, disbursement confirmations, repayment schedule, currency exchange records, and the NCE's receipt. A transaction chronology can help distinguish loan principal from other account activity. The filing should also reconcile the loan amount with administrative fees and other sources so USCIS can determine exactly which borrowed funds were used toward the qualifying investment.