September 27, 2018

EB-5 Visas – How to Obtain Funds From Lawful Sources

By Anish A. Parikh
Parikh Law Group

As the EB-5 Immigrant Investor Visa grows in popularity among foreign entrepreneurs each passing year, we at PLG often receive questions from our clients regarding how they may obtain their requisite EB-5 investment funds from lawful sources. Immigrant investors have many options when it comes to sourcing their EB-5 funding, and in this article we will explore some of the different and most common types of lawful fund sources.

Real Estate

The most common way for EB-5 investors to obtain the requisite monetary requirement is through the sale of real estate properties such as a home, land, or commercial property, or from securing a loan secured by those properties. In recent years, land and real estate values in countries such as India and China have dramatically increased, thus allowing many Indian and Chinese nationals to obtain their EB-5 investment funds from the sale or loan proceeds from real estate fairly easily. With this option, the USCIS will require evidence demonstrating that the current sale or loan of the property was a legal transaction, and that the original purchase of the property was secured using funds obtained through lawful means. Some our clients have faced the issue of having very limited or almost none of the original documents available to them, as the original sale of the properties may have taken place years or decades ago. When faced with this situation, it is imperative to have an experienced attorney versed in handling RFEs (Requests for Evidence), who can provide the USCIS with a detailed narrative and researched plat search findings clearly showing that the initial purchase was made with lawful funds.

Sale of a Business

The second most commonly utilized source for obtaining EB-5 investment funds is through the sale of a business. If you do decide to sell a business in order to raise the necessary funds to apply for an EB-5 Visa, you will be required to provide much documentation regarding the details of the business and the sale. First, you will be required to provide supporting documentation which establishes the lawful nature of the business. You will also have to show proof of the business’s earnings, that the business was originally started or acquired through lawful funds. Next, you must sufficiently prove that the sale of the business and transfer of funds into your account was a lawful transaction. Finally, you will most likely have to provide the USCIS a detailed explanation or narrative describing the health of your business, in order to justify the revenue or profits derived from its sale. The foregoing is a small list of examples of the evidence required, the USCIS could still send out an RFE requesting the exact details of the sale transaction including details of the bank accounts used and names on those accounts, etc. Investors are often warned to not have transaction proceeds directly transferred into their EB-5 commercial enterprise, as the strict requirements mandate that the funds be invested by you individually and doing so may disqualify the funding. Again, having an attorney with experience in handling the intricate nuances of your EB-5 petition is of utmost importance.

Business or Shareholder Loan

Another way to obtain lawful fund sourcing is through a business or shareholder loan. While this means of obtaining EB-5 investment funds is also a great option, it has its own set of specific regulations and constraints along with the regular proofs required for selling a business enumerated above. For example, it is important to note that the business loan you are obtaining may not be secured by assets of the EB-5 commercial enterprise you are creating. Other rules apply regarding repayment of the loan from your own funds, and any unfortunate mistakes may result in disqualification of your funds or your petition being denied.

Wealth Accumulation

If you have steadily accumulated wealth over the course of your career or lifetime, you may use these funds as a way to pay for your EB-5 commercial entity. However, it may be difficult to provide proof of income over many years or gradually accumulated savings for EB-5 petition purposes. For many EB-5 investors, providing adequate documentation of the source of investment funds derived from accumulated wealth poses a challenging situation. For many, wealth may have been accrued steadily over many years through income, many transactions such including the sale of numerous real estate properties or businesses, or generational family wealth. In this situation, an investor and his attorney will have to provide several years of tax returns and ample evidence of the petitioner’s financial background that can support a finding of lawful sources for your funds.

Sale of Stocks, Securities, or Retirement Accounts

Utilizing the proceeds from the sale of stocks, securities or withdrawal of retirement funds is another way for EB-5 investors to secure lawful funding. As with the sale of real estate or a business, investors must show adequate proof that the acquisition of the assets was lawful and the money used to initially acquire the securities or stocks was from a lawful source. For retirement accounts, investors are required to show supporting documentation of employment, contributions, and withdrawal of the funds into a personal bank account. Another option is to obtain a loan that is backed by your investment portfolio, and supporting documentation would be generally the same in this scenario.

Inheritance, Personal Loans or Gifts

EB-5 investors also use funds derived from an inheritance, personal loan or gifts. In these scenarios, sufficient information regarding the background of the donor or lender would be required, as well as the standard required proofs showing how the funds were originally obtained, etc. In the case of a substantial inheritance being the source of investment funds, the petitioner will have to establish not only their relationship with the decedent through probate documents or death certificates, but also provide information which verifies that the decedent obtained the funds through legal means.

As shown, there are a variety of sources from which investors may choose to obtain lawful funds for their EB-5 investments. Our goal at PLG is to provide our clients with a comprehensive analysis of their options and navigate the paperwork and evidence required for them so that our clients have successful outcomes. If you would like a consultation to discuss your EB-5 investment options and how PLG may represent your interests effectively, please give us a call at (312) 725-3476.