Problems With Sources Of EB-5 Funds

eb5 ad One of the big hurdles to a successful EB-5 application is to prove that the investment funds were “obtained through lawful means.” To do so, the investor must demonstrate how the money was earned or obtained and trace the funds all the way to the investment in the United States.

The most common source of an EB-5 funds are:

  • (i) a mortgage of the investor’s real property;
  • (ii) a sale of the investor’s real property;
  • (iii) a loan from the investor’s business; and,
  • (iv) the investor’s accumulated employment income.

Often times, parents may wish to “gift” their children the funds so that their children can apply for an EB-5 investor visa. However, in this scenario, the parents then have to show where they obtained the money they used to gift their children.

Common Problems with proving Employment Income

The most basic requirement to showing employment income is to at least have a statement from the investor’s employer indicating to USCIS how much is being earned and where it came from. However, just because an investor states he or she earned a certain amount of money from their employer, USCIS requires further supporting documents. In this scenario, the more documents provided to show the existence of this company and proof of the salary earned, the better.

Common supporting documents include:

  • bank records
  • tax payment records
  • employee contracts
  • the business license
  • capital verification report
  • tax registration certificate of the company
  • and even the business card of the investor

In the scenario where the investor owns the company, the requirements are even stricter. After all, the statement from the company no longer holds much weight if the investor is in control of the company.

Necessary documents will include:

  1. Capital Verification Reports
  2. Tax Payment Records
  3. bank statements
  4. and annual audit reports that spans an extended period of time showing income flow

Common Problems with Real Estate Mortgage Loans

Mortgage Loans of real properties, are in general, far simpler to use as major banking institutions provide clear contracts for proof. Thus, as long as the initial income used to purchase the property is explained in detail as mentioned above, then there is a clear visible route.

However, a common problem once the loan is signed, is when the Loan Purpose is written. Often times, people may write “For Children to Study Abroad” or “Personal Use.” These are problematic because the funds are not supposed to be an education fund. If mentioned under personal use, then the personal use must have no restrictions within the contract that may prohibit the loan from being used for investment immigration. In the end, however, it is usually safer to just write 'immigration', 'investment immigration', or anything else that specifically notes that the loan funds will be used for the EB-5 program. 

Loans from Company

Sometimes, investors would like to simply receive a loan from their company by using their shares as security. In these situations, at minimum, it is necessary to provide proof such as:

  • accounting reports
  • capital verification reports
  • and other documents that shows how much the shares are worth and a corporate resolution demonstrating that the company actually agreed to provide the loan

Remember, you want your application to be clear and concise so as not to irk the USCIS reviewing your application. Therefore, records and reports needs to be clear and easy to understand.

In addition, the next question would be, how were the shares purchased? Whether they were purchased through employment income, owned from the beginning when the company was a start-up, or any other reason, it will likely be necessary to fully explain the initial investment into the company in detail.

What if Records are missing?

It is possible that a house was purchased 10-15 years ago, and then the funds used to purchase the property were earned during a period before that. Asking for full records of an employment position over 20 years ago is sometimes unreasonable, and USCIS understands that too. In these situations, it may be okay to have a statement specifically announcing why the records are no longer available (either due to the extended period of time, business shutting down, or whatever other reason).

Still, any records that can be provided will only help the application. Take the time to search for records in order to avoid a weak application. In addition, sworn statements of former colleagues may help to provide evidence of the prior employment position.

Conclusion

In the end, what’s important to remember is being able to answer the question: “Where did the money come from?” Provide enough evidence to show where your EB-5 funds came from. Moreover, just because an investor makes enough employment income, if the money somehow disappears from records for two years and suddenly appears back in his or her back statements with no explanation, then there is a problem.

Another situation is in China, where there are limits to how much currency can be exchanged. If an investor simply trades RMB with a friend for USD, USCIS may wonder how the friend earned his US dollars. Eliminate any possible questions of how the money is flowing, and the application process will go much smoother.

(The above is informal guidance, not legal advice.  Investors should not rely on the below and Investors should retain an attorney to handle their I-526 application and client specific advice.)