investors are familiar with the basic requirements to conduct due diligence on whether a project is ‘ EB-5 compliant ,’ it ’ s more difficult to analyze what immigration and investment risks are present in the various EB-5 loan options offered today .
When considering whether to use a U . S . EB-5 loan to fund and EB-5 investment , investors should include an analysis of the below issues as part of their due diligence process . Each of these issues plays a critical role in the investor ’ s case and should be analyzed thoroughly .
ARE THE LOAN TERMS SUITABLE FOR EB-5 INVESTMENTS ?
The only thing consistent about U . S . EB-5 loan programs is that there is no consistency . Flavors and key terms vary , and while loan maturity and interest rates can understandably be different , one may also be surprised to find secured and unsecured options , ones that demand quarterly interest payments while others are willing to take annual payments ( or are willing to even let them accrue ).
While all these terms are important , it ’ s likely that an investor is looking for a short-term funding option that they will repay once they unlock access to whatever capital they need . One of the most important factors to consider are repayment ( and specifically pre-payment ) options that will allow the investor to exit the loan and minimize any interest payments if they are able to do so in the future .
While these programs may seem attractive at first , like any other loan , one should consider whether the terms are suitable
polished , professional underwriting and loan underwriting / closing package .
It ’ s not enough to simply create a separate loan entity and issue a one or two page “ loan document .” The application and closing process should feel similar to any other similar legitimate transaction with your local bank or credit union .
If one has questions about the approvability and legality of the loan under applicable federal , state , and USCIS law , is the lender able to credibly explain why it ’ s acceptable ( or do they make their counsel available to speak with you ?)
Finally , to guard against future potential requests from USCIS , it should be clear where the source of funding is coming from in case USCIS raises this issue later . Some lenders pull from a credit facility from a US banking institution . Others have healthy war chests and balance sheets that they ’ ve sensibly accumulated through the years . Either way , one should understand and feel comfortable that the funding provided to them is legitimate and explainable . Arguably USCIS cannot inquire about the source of funds for a third-party lender , however , they may examine whether it appears to be a legitimate and credible transaction .
LOANS ARE OFTEN LIMITED TO CERTAIN SELECT PROJECTS
Even if one finds a US EB-5 loan program that he or she feels comfortable with , keep in mind that the vast majority ( if not all ) of U . S . EB-5 Loan programs currently will only issue loans for a
" One of the most important factors to consider are repayment ( and specifically pre-payment ) options that will allow the investor to exit the loan and minimize any interest payments ."
for their specific situation , including whether they will actually be able to handle their debt service , including any escalating interest payments if the loans aren ’ t repaid at an agreed upon time .
CREDIBILITY OF LENDER & LOAN PROCESS
Does the lender have a professional underwriting process and loan package ? Just as how one would feel suspicious of applying for a loan with a company that has sloppy paperwork and mannerisms , it would help greatly with the lender ’ s credibility ( and peace of mind to the investor ) if there was a
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