The question of whether you can use an unsecured loan for your EB-5 investment has a surprisingly complex history. It’s a common query for investors who want to leverage capital without liquidating existing assets. For investors, understanding this history is key to knowing the current rules. The short answer is yes, you can use an EB-5 unsecured loan for your investment, but the documentation requirements are rigorous.
The Evolving History of the EB-5 Unsecured Loan Rule
The guidance on using an EB-5 unsecured loan has changed multiple times. Initially, USCIS permitted this practice. However, the agency later reversed its position and began issuing denials on petitions that used unsecured loans as their source of capital. The (now defunct) USCIS rationale was that an unsecured loan meant the investor’s own capital was not truly “at risk.”
This restrictive interpretation led to legal challenges from investors. Ultimately, a lawsuit was filed and won against the government (notably Zhang v. USCIS), which confirmed that the source of the funds (a loan) is separate from the use of the funds (the “at risk” investment). This compelled USCIS to revert to its original, more permissive stance. As of today, unsecured loans are once again an acceptable source of funds.
Understanding the Current EB-5 Loan Requirements
Under current policy, the cash proceeds from a loan, whether secured or unsecured, are considered capital for the purpose of an EB-5 investment. The critical point is that the loan is a personal liability for you, the investor, but the cash you receive from it is your asset to invest.
When you place that cash into the New Commercial Enterprise (NCE), it is fully “at risk.” This means the capital is subject to the fortunes of the business, with the potential for both gain and total loss, and cannot be a guaranteed-return or passive deposit. The real scrutiny, therefore, is not on the type of loan, but on the origin of the money. This brings us to the most important part of your petition: the source of funds analysis.
Proving the Lawful EB-5 Source of Funds for a Loan
When you use a loan for your EB-5 investment, you must still prove that the capital was lawfully sourced. You are not just proving your source of funds; you are effectively conducting a mini source-of-funds investigation on your lender.
What USCIS Scrutinizes in Your Loan
You cannot simply show a bank statement with the loan proceeds. You must provide a clear and documented path for the money. USCIS will analyze:
- The Lender’s Legitimacy: Is the lender a reputable financial institution? If so, the loan agreement and proof of transfer are usually sufficient. If the lender is a private individual (like a friend or family member) or a private company, you must prove their identity, their relationship to you, and, most importantly, the full financial trace of their funds.
- The Lender’s Source of Funds: This is the biggest hurdle and the most common point of failure. You must provide a complete paper trail for your lender. If your father is lending you money from his business, you will need to provide the business’s registration, tax returns, and financial statements to prove it’s a legitimate, profitable company. If a friend sold a property to lend you the money, you will need the final closing statement, the deed, and proof of the funds entering their account. The burden is on you to prove your lender’s funds are legitimate.
- The Loan Agreement: The loan must be a formal, commercially reasonable, and arm’s-length transaction. A simple, one-page IOU will not be sufficient. The agreement must be a formal legal document with a defined repayment term, a stated interest rate (even if low, it must be commercially reasonable), and clear terms. A 0% interest loan with no repayment date will be viewed as a gift, not a loan, which requires a different set of documentation (like a gift affidavit).
Charting Your Path Forward
Using an EB-5 unsecured loan is a viable strategy, but it adds a significant layer of complexity to your source of funds documentation. This dual-layer documentation, proving both the loan’s formal terms and the lender’s legitimate source of funds, means you must be prepared for a deep and thorough analysis of your lender’s finances. It’s a viable strategy, but only with meticulous preparation.
For comprehensive guidance on using an unsecured loan for your EB-5 investment, we invite you to download our free EB-5 guide, sign up for our free webinars where you can ask questions, or schedule a consultation with our expert immigration attorneys today.
