EB-5: The Most Common Sources of Lawful Funds for EB-5 Investors Explained | KNG Law

The EB-5 visa continues to be a viable option for foreign nationals to invest in commercial enterprises (companies) here in the U.S. and gain U.S permanent residency while doing so. There are two general requirements for the EB-5 green card: (1) the investment and (2) the job creation.

The investment (currently $1 million, or $500,000 in a targeted unemployment area "TEA") must be made into a "new commercial enterprise" which is basically any company entity that was formed after November 29, 1990. 

This article shares how the EB-5 investor can meet the very first requirement, the investment, and most particularly explores the multiple and various ways to meet the investment amounts required under the EB-5 visa category.

As a first consideration, the EB-5 investor, under immigration regulations, is required to show they "[have], or is actively in the process of investing capital obtained through lawful means." This involves a process of submitting documents such as business records (such as registration certificates, articles of incorporation, share certificates, and other similar evidence), years of tax returns, or any other evidence of lawful source of funds.

Apart from these basic business and personal tax record documents, the EB-5 applicant must show the "Actual Source" of the investment capital. With the above in mind, below are the most currently common sources of lawful sources of funds to meet the investment capital threshold requirements under U.S. immigration law:

1. Real Estate Sale or Mortgage

A very common source of funds for the investment requirement can be met by showing funds acquired through the sale of a property owned by the investor. Capital gains following the sale of a home, for example. It is important to note that evidence must also be submitted show that the property (such as a home or land) was initially acquired by lawfully obtained means.

2. Sale of a Business

Earnings from a business owned by the investor, or from a sale of any assets from the business, is another common source of funds that an EB-5 investor can use to meet the investment capital amount. The EB-5 investor must show that the business operations were lawful (documents about the business activities and products/services and company records will help establish that the business was/is a lawful business). Likewise, any earnings from the business used for the investment capital requirements under EB-5 is typically submitted such as tax records. Lastly, sales records and sales agreements of the business will be required for the EB-5 petition to demonstrate the sales proceeds of the investor's business.

3. Personal Loans or Gifts

Gifts and personal loans from family and friends is a third common way to meet the investment capital amounts required for the EB-5 visa. Just like any funds acquired through the sale of a business or real estate, documentation must be submitted showing the source of these funds (again the source of the funds must be lawful). For example, if parents of the EB-5 investor are gifting an amount of capital for the EB-5 investment, documents must show the background of where those funds came from i.e. where the parents received those funds. In addition, it is not required that the gift or loan funds only come from outside the U.S. The family or friend of the EB-5 investor that is in the U.S. may properly gift or loan the EB-5 foreign national investor funds acquired within the U.S., so long as (again) the funds are demonstrated to be lawfully acquired. 

These are just three of the most common sources of funds that can be used to meet the general EB-5 investment capital amounts required for the EB-5 green card process. Other sources can come from inheritances, sale of securities, shareholder loans, retirement funds, and general wealth accumulation.

Additionally, it's perfectly acceptable for an EB-5 investor to use a combination of any sources of funds they have through any various activities. Overall, the main takeaway is that there are many options to demonstrate lawful funds for EB-5. At the end of the day, much of EB-5 success comes down to successfully documenting and tracing the lawful acquisition of these funds. With proper documentation and a clear showing of the history of EB-5 investment funds, the EB-5 is one currently viable option for many individuals to fast-track their green card process without green card wait times here in the U.S., while supporting active investment into the United States economy. 

Reference:  Matter of Ho, 22 I&N Dec. 206 (Assoc. Comm. 1998).

By Kaitlyn Garcia, J.D. | Immigration Attorney | Houston, Texas