For foreign investors, professionals, and entrepreneurs, a clear and viable path to U.S. residency and eventual citizenship is through the EB-5 investment program, which trades U.S. visas and the right to live and work in the U.S. for a substantial capital investment in the U.S. economy.
For the purposes of the visa, “substantial” is equal to $500,000 in certain hard hit U.S. industries or $1,000,000 in any other U.S. industry. In addition to investing the cash, foreign investors also have to make sure that their investment creates at least 10 U.S. jobs.
Getting the Cash
Foreign investors love the idea of helping the U.S. economy in exchange for U.S. visas for them and their families, but getting the money together to make the investment isn’t always so simple. This is why the EB-5 investor program allows foreign investors to use secured loans in order to finance a qualifying investment.
EB-5 program restrictions require that funds invested through the investor visa program remain at risk, in other words, not backed by the guarantee that the funds will be replaced. Since a secured loan would be secured by personal assets, the at-risk requirement is met.
A speedbump that foreign investors may run into when they try using a secured loan to fund an EB-5 investment is proving that the loan is in fact adequately secured, meaning that the value of the property securing the loan is actually valuable enough to cover the investment.
An experienced EB-5 attorney will be able to review loan documents to determine whether or not they will satisfy visa requirements. If not, the attorney can work with the client to repair the documents or in securing another loan. Catching and fixing discrepancies in loan documents can greatly reduce the chance of an EB5 application being denied, which is important for foreign investors who don’t want to waste any time in coming to the U.S.
Strict Documentation Requirements
In addition to showing that a loan is adequately secured, foreign investors will also need to show that the source of their cash is legitimate. Pooling money from multiple sources into a single corporate account may actually hurt the investor if he or she is later unable to prove the legitimate source of those funds.
The United States is heavily invested in preventing the influence of organized crime and terrorism, which is why it requires every dollar invested through the EB-5 program to be shown as legitimately earned before being allowed to fund a U.S. venture.
Unfortunately, proving the legitimate source of funds is not something that investors usually think about when they go around raising money for their venture. The idea of getting money at all is enough to make many investors forget to inquire about the money’s legitimacy, particularly if the investor doesn’t want to insult the donor.
Working with an attorney early one will help the investor make sure that the source of any cash raised is legitimate and adequately documented.