EB-5: Common Types of Sources of Lawful Funds

In recent years, the EB-5 immigrant investor visa has become a popular way for innovative foreign entrepreneurs to invest in new commercial enterprises in the United States while obtaining a permanent residency visa. Immigrant investors can obtain their EB-5 investment funds from many different kinds of lawful sources, and we will explore the most common types of lawful fund sources for you in this article.

If you have questions about the EB-5 immigrant investor visa category, please contact our experienced immigration attorneys at The Law Firm of Shihab & Associates, Co., LPA to consult with an attorney.

Real Estate Sale or Mortgage

Perhaps the most common source of funds you may have available to you as an EB-5 investor will be the proceeds from the sale of your real estate property, or from a loan secured by your real property. Notably, Chinese property values have increased dramatically in the past fifteen years, and many Chinese EB-5 investors acquire their lawful funds from the sale or loan proceeds of real property.

As a petitioner, you must provide documentation of the home purchase or loan agreement, the documentation of the final sale agreement, and documentation that the funds were transferred into your own personal bank account.

A common problem you may face, is that you must also document that the property was originally purchased with funds from lawful sources. USCIS may want to verify that the sale or loan of the property was a legal transaction, and also that the original purchase of the property was with legally-sourced funds. It can be a challenging task to prove that the real property was purchased with legal funds, if the original transaction took place many years or decades in the past, and original documents are few or non-existent.

If the USCIS sends out a “Request for Evidence” (RFE) on this issue, you can provide a detailed narrative, backed up with supporting evidence of an initial purchase made with lawful funds. If the documents are no longer available, you must attempt to provide other evidence and explanations for the unavailability of the records.

If you may be confronted with this challenging situation, contact us by email or phone at 1-877-479-4USA (4872) for a consultation to discuss your planned investment and how we can represent your interests effectively.

Sale of a Business

If your lawful source of funds will come from the sale of an existing business, you must provide substantial documentation about the business. You will need to establish the lawful nature of the business through documentation and evidence. Also, the business’s earnings should be adequately described and backed up by supporting evidence.

The sale of your business must be sufficiently documented, including the transfer of the proceeds into your individual bank account. Another important requirement, is that there is evidence that your business was initially started or acquired with lawful funds. If this evidence is unavailable or lacking, then you will need to back it up with an explanatory narrative and any other supporting evidence.

The USCIS could issue an RFE inquiring into how your business’s financial health—in other words, how your finances can support the type and amount of revenue and profits claimed. In this case, a letter from an accountant or financial professional supporting your business’s financial health can be very important.

Finally, as an EB-5 petitioner you should avoid transferring funds directly from your old business to the account of your newly-created EB-5 commercial enterprise. USCIS could assert that the funds were not invested by you as an EB-5 investor immigrant, but actually by your business entity. This would disqualify your investment for EB-5 purposes. In this case, it would be necessary for you to provide other evidence that the funds actually belonged to you and not your business. This could be provided by confirmation from all of the other shareholders.

Shareholder Loans

A shareholder loan is when a business grants a loan to you as a shareholder. You can use this type of funding for your EB-5 commercial enterprise, however the loan cannot be secured by the assets of the new EB-5 enterprise. Repayment of the loan must be secured only by your other assets, including your ownership interest in the original business. For documentation, you must meet all of the other requirements as mentioned above for the sale of a business.

Personal Loans or Gifts

If your EB-5 funds are received as a personal loan or gift, you will need to provide substantial documentation on the background of the donor or lender. This can include the person’s resume, professional credentials, employment history, income tax returns, details on how the funds were originally obtained and their path, and a narrative of why the gift or loan was made. As an EB-5 petitioner, you should plan on providing basic evidence that the donor/lender obtained the funds by lawful means, whether from income, business, or real estate proceeds.

Inheritance

For this source of funds, you will need to submit evidence showing your relationship with the decedent. This can include probate documents, death certificates, or bank account statements. You may need to provide information on how the decedent obtained their funds.

Sale of Securities and Retirement Funds

Many investors obtain their lawful funds through the sale of securities or withdrawal of retirement funds. Documentation for this follows a similar reporting of evidence for the sale of real estate, including transactional documents from the acquisition, sale, and transfer of the securities into your personal bank account. You must show that the initial source of the funds used to purchase the securities was lawful. For retirement funds, you will need to document evidence of your employment, contributions, and withdrawal of your funds.

You may also be able to obtain a loan that is secured by your investment portfolio. The documentation for this would be similar to a loan secured by a real estate.

General Wealth Accumulation

For many EB-5 investors, a surprisingly challenging situation can occur when you have accumulated your wealth slowly over time from a lifetime of gradual income savings or from many small transactions. This situation can actually be more difficult to document than a recent, one-time transaction that generated all of your investment funds.

You can document your general wealth accumulation through your income earned and reported on tax returns, records of the specific transactions that produced income, or records of income earned from greater than five years ago. You must provide substantial evidence of your financial background, and show a reasonable level of income that can support a finding of a lawful source of your funds. You may need to provide a detailed narrative backed up by sufficient corroborating evidence, of your gradual accumulation of wealth over a long period of time.

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