On February 26, 2015, the USCIS hosted a stakeholder’s call to discuss EB-5 source of funds issues. This is the first time the USCIS has specifically discussed this issue with the general public and the call itself was very informative.

There was, however, one topic of discussion that seems to have been misconstrued which this post is attempting to clarify.

Since the call, there have been people voicing concerns that the USCIS is not allowing parents to obtain loans for the purpose of funding EB-5 investments for their children. This is incorrect.

The USCIS did state that if an EB-5 investor takes out a loan using collateral that is not owned by the investor, it does not meet the legal definition of “capital” used for EB-5 investment.

Then there was a theoretical discussion between the USCIS and attorneys on what exactly that legal definition entailed.

However, right after the conversation, it was clarified that if the loan proceeds were gifted to the EB-5 investor unconditionally by the owner of the collateral, the USCIS would accept the funds.

Example A:

Biyun obtains a bank loan using property owned by her mother and files for EB-5.

In this case, the USCIS is saying that the loan proceeds do not qualify for EB-5 because they were not secured by Biyun’s personal assets.

Example B:

Xinyue’s father obtains a bank loan using property he owns and then makes an unconditional gift of the proceeds of that property to Xinyue. Xinyue then applies for an EB-5 with the gifted funds.

This is very common practice in EB-5 and the USCIS specifically said on the call that this is acceptable. Note that the father’s loan still must be secured by his personal assets (or if the father is not the 100% owner of the collateralized assets, then the co-owner(s) must also sign the mortgage agreement) and the loan proceeds must be unconditionally gifted to the child.