We recently had an E2 investor visa approved with the investor using a loan as a source of funds. The funds for the E2 investment came 100% from a personal loan.
The investor was approved the E2 visa without any issues for a new business for the maximum period allowed the treaty between their home country and the United States.
This success story highlights how loans can be a viable source of funding and investment for those seeking to obtain an E2 visa.
In this article will discuss how can you use a loan for an E2 visa application, the steps you need to take, and crucial information you need to successfully obtain an E2 visa with a loan.
The E2 visa explained
To qualify for an E2 visa, investors must meet the following requirements:
The E2 visa regulations regarding the use of loans center around the requirement that the investor “has invested or is actively in the process of investing“.
Determining loan eligibility
According to E2 visa regulations, the source of the investment may include funds obtained from:
The source of the funds does not need to be from outside the US and must not be from criminal activities. Further, the regulations state that the invested funds must be at risk and subject to partial or total loss if the E2 business does not work.
So, where does that leave us when it comes to using a loan for E2 visa?
Use loans for E2 visa investment
E2 visa regulations permit the use of loans for E2 visa.
Loans from banks and financial institutions
The loaned funds for the E2 investment can originate from the US, including loans from US banks, savings and loan associations or other financial institutions.
Moreover, loans can originate from foreign financial institutions. Here it is important to ensure that the chosen bank or financial institution operates legally and has no ties to US sanctioned individuals, governments or organizations.
Loans from individuals
Investors can also use loans from individuals for E2 visa. These individuals can be family members, unrelated parties, or even a group of lenders. The loaned funds can originate domestically (within the US) or internationally (outside the US).
However, when using funds loaned from individuals, a crucial requirement is that the funds are obtained from lawful activities. To satisfy this requirement, E2 visa applicants must provide documentation proving that the individual providing the loan has obtained the funds through lawful means. This involves submitting documents such as tax filings, bank statements, dividend statement, evidence of business or property sales, inheritance records and similar documents.
Loan Collateral & Guarantee
A fundamental requirement for E2 visa is that the invested capital is placed “at risk”. This means that the investment must be subject to partial or total loss if the E2 business venture fails. Consequently, loans secured by the assets of the E2 business itself do not count as E2 investment. Since the collateralized assets effectively serve as a safety net in case of business failure, the investment is not truly “at risk”.
Let’s consider an example: An E2 investor purchases a pizzeria for $250,000 with a $50,000 down payment. The remaining $200,000 is financed through seller financing, meaning that the buyer makes payments to the original owner over a five-year period. However, in case of default, the original owner takes the pizzeria back.
In this case, only the $50,000 down payment counts as an E2 investment. The remaining $200,000 financed amount does not count because it is secure by the E2 business.
Let’s explore another example: The same pizzeria is now purchased by another E2 investor, but the deal is financed entirely with a $250,000 loan from a bank. The loan is personally guaranteed by the E2 investor. In case of default, the bank can seize the investor’s personal property, but not the business assets.
In this case, the investor stands to lose a significant amount, potentially everything, if the E2 business fails. Therefore, the full $250,000 loan amount qualifies for E2 visa because the loan was personally guaranteed and secured by the personal assets of the borrower.
Why are loans important for E2 visa?
The E2 visa requires a substantial investment in a US business. However, investors with limited capital can use loans to fulfill this requirement and obtain an E2 visa.
It is important to count loans as investment for E2 when the investor is contributing none or a small amount of their own capital into the E2 business. This becomes particularly important for smaller businesses with lower acquisition or startup costs. In such cases, where the overall investment is relatively small, immigration officers want to see a greater portion of the overall investment being placed at risk.
However, for businesses with relatively large acquisition or startup costs, such as car dealerships or manufacturing facilities, the importance of loans for E2 visa diminishes. Even if a portion of the purchase price or start up cost is financed through a loan secured by the E2 business itself, the impact on the success of the E2 visa is minimal. This is because the required investment is so large that the investor has to contribute a substantial amount for the business to have any chance of success.
In cases where all or most of funds for the E2 investment are loans from relatives or friends, it is crucial to document the loan properly to ensure compliance with immigration requirements.
Conclusion
While personal funds are a common investment source, you can use loans to obtain an E2 visa. However, it is important to comply with US laws and regulations in regard to the source of loan funds and loan requirements and documentation.
Reference
Malescu Law P.A. – Business & Immigration Lawyers
