The answer is YES! EB-5 investors can use unsecured loans as investment capital.
For a long time, USCIS had only allowed use of loans secured by investors’ own assets. However, in October 2020, a three-judge panel at the D.C. Circuit Court ruled that EB-5 investors can use unsecured loans as their Investment Capital for I-526 applications. It is a historic decision on the US EB-5 Visa Program. This decision now prevents USCIS from denying EB-5 Petitions on the basis of how the loan was obtained. It will, further, help the applicants to have the financial independence to borrow loans for their investment amount.
This significant verdict on the U.S. Immigration has eased the investment process and will also create more opportunities for the foreign investors and entrepreneurs from all around the world to invest and obtain U.S. Green Cards under the EB-5 Program.
This landmark ruling was centred on whether unsecured loans could be used as investment capital for I-526 applications. For many years, United States Citizenship and Immigration Services (USCIS) has allowed financing the EB-5 investment only through investor’s asset value. The USCIS interpreted unsecured loans in the category of Source of Funds as a debt and has been denying petitions using that element in their source of funds.
In its appeal, USCIS tried to argue that to allow unsecured loans as EB-5 investment capital would be equivalent to third parties buying Green Cards for foreigners. However, the panel ultimately rejected the petition. It said that there is no need to have a secured loan to file an I-526 application because the investment project will be able to use the capital even if the investor defaults on their loan, and thus this source of funds should still be permissible.
Circuit Judge Gregory G. Katsas, supported the EB-5 investors, and stated, “Cash is fungible, and it passes from buyer to seller without imposing on the seller any of the buyer’s obligations to his own creditors. The buyer’s source of cash — whether paycheck, gift, or loan — makes no legal or practical difference.”
In support of the investors, Judge Katsas further emphasised, “As far as the enterprise is concerned, whether or how the investor’s loan was secured makes no difference; it can deploy the cash either way, and it faces no exposure if the investor defaults on any obligation to a third-party lender.”
This decision is welcome news to many potential EB-5 investors as it simplifies things considerably for the investors, and brings them a step closer to fulfilling their American Dream.
The US EB-5 Program is one of the fastest ways to obtain permanent residency in the U.S. The Program offers Permanent Residency to high net worth foreign investors who can help the U.S. economy through investment in business leading to job creation. The Program enables Investors with their spouse and unmarried children under the age of 21 to obtain a U.S. Green Card.
To qualify for EB-5, foreign investors must meet specific USCIS requirements of investing a minimum of $1.8 MILLION, or $900,000 in a Regional Center project or Business, and create at least ten new jobs.
Acquest Advisors is an Investment Immigration Advisory specialising in Citizenship and Permanent Residency through Investment Immigration programs run by governments esp. America, Canada & Europe.