Last Updated on November 29, 2022 by Anda Malescu
The article discusses can you use unsecured loans for EB5 visa? Generally, it is possible to use a loan for EB5 visa if the loan complies with the EB5 visa regulations.
The United States Citizenship and Immigration Services (USCIS) which administers the EB-5 permanent residency (green card) through investment program announced a new policy on July 22, 2021 regarding loans for EB5 visa program.
The policy alert updates current guidance to treat obtained loan proceeds as a contribution of cash rather than indebtedness. That allows EB5 investors to borrow funds in the form of unsecured loans to use as an EB5 investment which was not possible until now. The previous policy guidance was to require that loans are personally guaranteed by the investor and are secured by his or her personal assets that do not include the new business created for the EB-5 visa.
In its policy alert the USCIS states that it will continue to determine whether loan proceeds were lawfully acquired and whether the investor has placed the required amount of capital at risk for the purpose of generating a return on that capital. When determining whether loan proceeds are lawfully acquired the USCIS will look into how the person or company obtained the money that it borrowed to the investor.
This policy update regarding loans for EB5 visa is the result of a federal court decision in the case Zhang v. USCIS. The case of Zhang v. USCIS, was filed in 2015 in the U.S. District Court for the District of Columbia on behalf of anybody who has an immigrant petition for an EB-5 investor, that was either denied or will be denied on the sole basis of investing loan proceeds that were not secured by their own personal assets.
In November 2018, the court ruled that loan proceeds are simply cash. In the court’s view the USCIS lacked the regulatory basis to impose conditions on how the investor obtained their money in regard to the qualities of a loan transaction as long as the money came from legal sources.
USCIS could not require that the loan transaction be a secured loan, nor could it require the investor to be the principal debtor. Further courts ordered USCIS to reconsider the petitions that were denied solely on the basis of investing unsecured loan proceeds. On Oct. 27, 2020, the USCIS lost the final appeal of the district court’s decision, leading to the recent policy update.
The effect of this new rule would be to greatly expand the pool of potential EB-5 investors. Under the old rule wealthy individuals that wished to help either their grown children or other close relatives or friends obtain an investment-based green card had to make a gift in the form of donation. That often created undesirable tax consequences, especially in countries where donations are taxed at high rates. In addition, relatives might be more inclined to loan money, even if unsecured, for the purposes of an EB-5 visa investment rather than making an outright donation.
Can you use unsecured loans for EB5 visa investment? If you are considering applying for an EB5 visa for USA and have questions about the source of capital, contact us or schedule a consultation with our EB5 visa lawyers in Miami, Florida USA.
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