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Money and structure

Borrowed funds

Also called Loan proceeds, Investment of loan proceeds.

Borrowed funds are money an EB-5 investor is lent and then contributes as capital. Since Zhang v. USCIS, USCIS evaluates invested loan proceeds as a cash contribution, not indebtedness, so the loan need not be collateralized, but for petitions filed on or after 14 May 2022 the statute counts them only if the loan was made in good faith and not to circumvent the limits on permissible sources.

What it decides

Two rules govern. On whether loan proceeds are capital, USCIS treated invested proceeds as indebtedness, and so demanded collateral, until the district court in Zhang v. USCIS held on 30 November 2018 that 8 CFR 204.6(e) did not support that reading; the D.C. Circuit affirmed at 978 F.3d 1314 (2020), and policy alert PA-2021-15 of 22 July 2021 had USCIS evaluate lawfully obtained loan proceeds as a contribution of cash. The collateral test survives only where the debt instrument itself goes into the enterprise: there the investor must be personally and primarily liable, the debt secured by assets the investor owns, and no enterprise assets pledged. On source of funds, for petitions filed on or after 14 May 2022, 8 U.S.C. 1153(b)(5)(L)(iii) requires the money to have been lent in good faith and not to circumvent the limits on permissible sources, and the petition must document the lender's own funds unless the lender is a bank. Borrowing against dirty assets saves nothing: 8 U.S.C. 1153(b)(5)(D)(ii)(III)(aa) excludes the cash proceeds of indebtedness secured by unlawfully acquired assets.

Governed by 8 U.S.C. 1153(b)(5)(L)(iii) for the good faith and anti-circumvention test and the bank carve-out on lender documentation, and 8 U.S.C. 1153(b)(5)(D)(ii)(III)(aa) for the exclusion of proceeds of unlawfully acquired assets; USCIS Policy Alert PA-2021-15, Immigrant Investors and Investment of Loan Proceeds, 22 July 2021, and USCIS Policy Manual Volume 6, Part G, Chapter 2, Section A (6 USCIS-PM G.2(A)), page's most recent listed update 26 February 2025, which together supply the treatment of loan proceeds as cash, the surviving collateral test for invested indebtedness, the 14 May 2022 effective date, and, at footnote 14, the 30 November 2018 Zhang date. Zhang v. USCIS, 978 F.3d 1314 (D.C. Cir. 2020), has no citable government URL; the Policy Manual footnote carries both the citation and the operative date, and is cited here in preference to a court reporter. 8 CFR 204.6(e) still prints the old indebtedness definition unamended, so the regulation alone is not a safe source for the current rule.

Where this is explained properly

Pages here that go into borrowed funds rather than mentioning it.

Related terms

  • Zhang v. USCISZhang v. USCIS is the class litigation that ended USCIS treating an EB-5 investor's invested loan proceeds as indebtedness requiring collateral: the district court set the denials aside on 30 November 2018 and the D.C. Circuit affirmed on 27 October 2020, holding that cash in 8 CFR 204.6(e) includes the proceeds of third party loans.
  • Secured indebtednessDebt that the investor is personally and primarily liable for and that is secured by the investor's own assets, which counts toward the EB-5 capital requirement only when the debt instrument itself is what goes into the enterprise, not when the investor contributes cash borrowed against those assets.
  • Unsecured loanAn unsecured loan is borrowing that pledges none of the investor's own assets, and its cash proceeds can fund an EB-5 investment: since Zhang v. USCIS the collateral test in 8 CFR 204.6(e) reaches only a debt instrument contributed to the enterprise, not lawfully obtained cash that the investor happens to have borrowed.
  • Source of fundsSource of funds is the documentary showing that an EB-5 investor's required capital, and the money used to pay administrative costs and fees, was obtained from a lawful source and through lawful means, proved by records rather than by assertion.
  • CapitalCapital is the cash and tangible assets an EB-5 investor contributes to the new commercial enterprise. Two texts define it: the statute, which governs petitions filed on or after 15 March 2022, and the older regulation, whose conditions on debt USCIS still applies alongside the statute.

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