Capacity refers to the ability of the project to generate enough income to cover its debt payments financial obligations even under unforeseen circumstances .
Debt Service Coverage Ratio ( DSCR ) The DSCR measures an entity ' s ability to use its operating income to cover all its debt obligations , including principal and interest payments . It is a direct indicator of the project ’ s capacity to sustain financial obligations through its operational earnings .
A DSCR greater than 1.25 is required , with a higher ratio of over 1.45 being preferable . Ratios above 1.25 provide confidence that the project generates adequate income to comfortably manage debt payments , while higher values provide additional assurance of financial robustness against unforeseen downturns or income fluctuations .
By maintaining this ratio within the recommended threshold , EB-5 projects demonstrate robust financial health , enhancing investor confidence by ensuring that financial obligations can be met even under challenging conditions , thereby making the investment more secure and appealing .
Capital – Investment structure and equity contribution Capital involves analyzing the capital stack of the project , which includes the equity provided by sponsors and all forms of debt and preferred equity . A strong application features a high proportion of equity relative to debt , which reduces financial leverage and thus decreases risk . The composition of the capital stack is crucial as it reflects the financial robustness of the project and the commitment of the sponsors , making it a critical indicator of the project ' s stability .
The DSCR measures an entity ' s ability to use its operating income to cover all its debt obligations
Collateral – Security backing the investment Collateral pertains to the assets that secure the loan . For EB-5 projects , the advance rate on senior debt compared to the value of the collateral ( typically real estate ) is a key metric . A conservative loan-to-value ratio indicates that the project is not overly leveraged , providing a substantial cushion to absorb potential market fluctuations and ensuring that investors have solid security backing their investment .
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