EB-5 and Banking Relationship

EB-5 and Banking relationship:

EB-5 investments, by their very nature, involve some element of risk for investors. The USCIS requires that the money invested into EB-5 projects be considered ‘at-risk’ in order to qualify for the EB-5 program. For years, the lending industry has misunderstood this ‘risk’.

Banks have historically been hesitant to extend loans to EB-5 projects, because of the perceived risks associated with the program. However, the risks lie not in the EB-5 aspect of the project, but rather in the fundamental structure of each project itself.

Sound projects, EB-5 or otherwise, share many of the same basic characteristics. They tend to follow a proven business model and express strategies for development, growth, and exit. The projects also provide a good or service with enough market demand for sustainability and have enough initial capital reserves to fund the first few months of operation.

The difference between an EB-5 and non-EB-5 project is its association with, or lack thereof, USCIS requirements. EB-5 projects must create jobs in order to qualify for the EB-5 program. EB-5 projects are identical in structure to non-EB-5 projects, yet have an emphasis on job creation. EB-5 projects are no less successful than non-EB-5 projects due to of their association with the EB-5 Immigrant Investor program. Projects, in general, find success through sound business structuring. Not only do EB-5 projects possess sound business structuring, they also manage to add job creation to their overall mission.

The lending industry does not readily extend loans to EB-5 projects, because of their concern that the projects will be unable to service the loans. However, as expressed in EB-5 business plans, loans are serviceable through the approved EB-5 investment capital held in escrow.

An EB-5 project has a dedicated fund with approved foreign investment capital held in an escrow account. As with anything else government-affiliated, the process of completing the EB-5 program, and consequentially releasing of funds, experiences some delays. Because of these delays, EB-5 projects seek early stage funding from the lending industry.

Instead of looking at the term ‘EB-5’ as a red-flag, lenders should consider EB-5 projects as extra-finely-structured projects. Not only are EB-5 projects job creating, but the success of the project significantly affects the lives of the stakeholders. In other words, EB-5 Regional Centers facilitate the development of projects and businesses which are required by program regulations to be economically viable, financially sustainable, and profitable for all stakeholders. Therefore, EB-5 regulations put projects in a position to service any loans that they may have acquired, making them an ideal choice for the lending community.