It is important to note that when an EB-5 investor uses borrowed funds, for example, from a home equity loan or from a company equity loan to invest in an EB-5 project, USCIS will likely ask for proof that the EB-5 investor can repay this loan.
For many investors, this may be easily achievable, yet for others it may not be so easy, which could be in part why they needed to borrow the funds in the first place.
An example of when this type of scenario can work occurs when an investor uses a home equity loan of $500,000 to attain the funds needed for the EB-5 investment. If however, the investor's total debt on the home is, for example, $1 million on a $5 million home (after borrowing against the home to make the EB-5 investment), the investor could easily argue that they could liquidate the home and repay the loan.
It is a great advantage to investors to be able to use borrowed funds in this way, but all parties should be wary of the pitfalls in doing so. For regional centers, investors' ability to pay back the loan should be vetted before the investor's I-526 is submitted, and assurances in writing should be asked from the investor to demonstrate that the status of their loan or their ability to pay it back will not change any time soon.
Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans, economic impact reports, feasibility studies and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com).