One of the most common questions we get from investors is whether it’s okay to get a loan for EB-5 or receive a gift. The short answer is yes, you can, but there are a few things that you need to be aware of in terms of the Source of Funds analysis.
The Source of Funds refers to the USCIS requirement that all EB-5 funds be lawfully obtained.
Using loans for an EB-5 Investment
Getting a loan for EB-5 is actually quite common. However, there’s an important condition to that loan:
When loan proceeds are used to finance an EB-5 investment, the loan must be secured by the investor’s personal property.
So the most commonly used type of loan is the property loan, where the investor uses his real estate as collateral for a loan. In other words, in this case the investor takes out a mortgage. Investors who own businesses can also take out a shareholder loan using their ownership interest in a company as collateral.
One thing to note is that when using personal property such as real estate or shares of a company as collateral, you must also be able to show the history of how you obtained the property in the first place. Previously, if you used assets that were under your ownership for more than five years, this wasn’t a requirement, but the USCIS changed its policy approximately three years ago. Now, all investors need to be able to discuss this to a certain extent.
Investors won’t have to evidence every dollar they made to purchase property for example 10 or 20 years ago, but they will still need to be able to explain the background of the purchase. An experienced EB-5 immigration attorney will be able to guide them through this process.
Using gifts for an EB-5 Investment
With more parents gifting funds to their children who are studying in the U.S., using gifts to finance EB-5 has also become more common. An important thing to know is, however, that when a petitioner uses a gift to finance EB-5, the Source of Funds analysis needs to be done as if the person making the gift is the EB-5 petitioner.
So if a petitioner receives a gift from his or her mother to make an EB-5 investment, the USCIS will treat their mother as if she were the main investor and will require the same documents from her.
Using gifts and loans combined for an EB-5 Investment
In some cases, an EB-5 investment can have different components. Here we will give an example of a combination of a gift that is also a loan.
When the EB-5 investor is using EB-5 funds that were gifted to him or her by a parent and the parent took out a loan to gift the investment funds to the final investor. Using both a loan and a gift is fine, but we are now looking past the initial investor and treating his or her parent as the investor.
So the loan that the parent took out must be secured by that parent’s personal property. One common question people ask about gifts is whether the gift must come from a family member.
There are currently no restrictions per se that require gifts come only from family members. However, the gift does have to be bona fide. In other words, it has to be real. If you are getting a gift from someone unrelated to you, the gift or lending construction has to make sense and you have to be able to show that it makes sense.
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