EB5 Investor visa
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The initial step in applying for an EB-5 visa is filing Form I-526, Immigrant Petition by Alien Investor, to US Citizenship and Immigration Services (USCIS). By filing this petition, the investor demonstrates to USCIS that they fulfill all of the EB-5 program’s requirements, especially that they have invested the requisite amount in a new commercial enterprise (NCE) and that their investment will generate 10 full-time, permanent jobs for U.S. employees.
While the previous description makes this procedure appear straightforward, supplying required supporting papers complicates matters. To back up job creation forecasts, the applicant should offer a complete business strategy and a reliable economic assessment. Along with giving documentation such as bank records and loan certificates to demonstrate that their capital is irreversibly committed to the investment, the investor must also demonstrate that the investment capital was obtained legally.
Asset-based loans are the most popular source of investor money in the EB-5 visa program. Loans are completely appropriate funding sources, but investors must give proof that all assets and loans were obtained legally. If an investor borrows from a private individual rather than a financial institution, the investor must also demonstrate that the lender’s money was obtained legally.
We created a case study that demonstrates a technique for establishing that money was legally obtained in a case involving a loan secured against an ownership share in a hotel, with the loan funds originating from payments received by a person from a firm. We also offer a printable EB-5 source of funds sample that demonstrates how to submit supporting documentation to USCIS.
Case Study of an EB-5 Funding Source: Funding an EB-5 Investment with a Loan Secured Against an Asset
A hotel is 40% owned by an investor, let’s call her Jane Smith. Jane’s father had owned the hotel, and when he died, he gave a 60% portion to Jane’s mother and a 20% share to Jane and her sister. Jane’s mother donated Jane 20% of her ownership share in March 2020, leaving Jane with a 40% stake. The hotel was appraised at $2,500,000 in March 2020. This means that Jane’s 40% stake is worth $1,000,000.
Jane obtained an $800,000 loan from John Doe in April 2020, using her hotel investment as security. The loan is secured by a mortgage deed on Jane’s hotel collateral and a personal guaranty issued by Jane to John, the lender. Jane then invests the $800,000 loan in an EB-5 project in a high-demand employment location (TEA).
Documents required to demonstrate that the loan is derived from legal sources of funds
Jane must demonstrate ownership of the capital utilized for the EB-5 investment in order to fulfill USCIS standards. Although “capital” can relate to cash, the USCIS definition in Volume 6, Chapter 2 of the Policy Manual is substantially broader:
Capital includes cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets owned by the immigrant investor, as long as the immigrant investor is personally and primarily liable and no assets of the new commercial enterprise on which the petition is based are used to secure any of the indebtedness.
As a result, Jane must demonstrate ownership of the collateral before presenting loan documentation.
1. Demonstrating ownership of the collateral
Jane’s I-526 petition should be accompanied by documentation demonstrating that she owns a portion in a hotel that she inherited from her father and got as a gift from her mother. She must also demonstrate that her portion offers sufficient collateral to serve as security for the loan.
Jane should include the following documentation in her cover letter to properly explain the source of her collateral to USCIS:
Title certificates for the hotel
Selection of hotel online booking websites (as proof that it exists and is in operation)
The death certificate for her father
Will of her father
Donation deed demonstrating that Jane’s mother gave her shares in the hotel.
2. Hotel valuation letter demonstrating the loan agreement’s legality
Jane must demonstrate that the loan money was obtained legitimately. In other words, she must demonstrate to USCIS that she engaged in a valid loan deal, with the loan secured against her hotel collateral. Jane may produce the following documentation to establish the loan’s legality:
Note on the Loan Agreement
Monthly documentary stamp tax declaration report for mortgage deed recording
3. demonstrating that the loan money was received legally
Finally, Jane must produce proof of the origin of John Doe’s finances. Assume John is a managing member of XYZ Consulting, a consulting firm that was founded with no start-up cash. The monies he utilized to offer the loan originate from profits issued by the corporation.
Jane should provide copies of John’s passport and most recent tax returns to authenticate his identification. Following that, she should give a quick outline of John’s role in the firm as well as the business itself. Jane might submit the company’s bank statement for its first year of business to demonstrate that it began with no start-up money.
Jane can supply the following supporting documentation to demonstrate that the firm exists and is in good standing:
XYZ Consulting Certificate of Formation IRS FEIN letter for XYZ Consulting Operating agreement for XYZ Consulting
Jane can then present a brief description of XYZ Consulting’s services, using the operating agreement as documentation. Jane might include the following to demonstrate that the company’s income—and consequently the dividends paid—comes from legitimate activities and that all revenues have been taxed:
A sampling of 2018 customer bills (the previous fiscal year)
XYZ Consulting’s 2018 bank statements, with payments related to invoices marked for convenience.
2018 audited financial statements for XYZ Consulting
XYZ Consulting’s 2018 tax return
The documents mentioned above include information regarding the dividends given to the company’s members. However, Jane must still present the dividend amounts to establish that John had the means to make the loan. Jane should include the following information:
All XYZ Consulting tax-related papers
John’s personal tax paperwork demonstrating revenue from XYZ Consulting
Letter from the company’s auditor explaining the payments John’s personal bank statements covering the period in which the dividends were paid
As Part of Your EB-5 I-526 Petition, Explain the Source of Funds
The I-526 petition is accompanied with a cover letter explaining the relevance of the evidence given to USCIS that the petitioner’s investment conforms with the EB-5 program’s requirements. It also details the exhibits used to support the petitioner’s arguments.
Download our example I-526 source-of-funds cover letter section to have a better idea of how to provide source-of-funds information and exhibits to USCIS. This sample source-of-funds section demonstrates how an investor might establish the source of EB-5 investment capital received through a loan secured against real estate, with loan funds coming from firm earnings or dividends.