An impermissible EB-5 loan is a loan that fails to meet the requirements of the EB-5 program, which mandates that the loan must be structured as an equity investment in a New Commercial Enterprise (NCE) where the investor's capital is "at risk" and has a chance of profit and loss.
In an impermissible EB-5 loan, the loan is structured as a debt investment rather than an equity investment. This can occur when the investor is promised a guaranteed return or interest rate on their investment, which means that their capital is not truly "at risk."
Impermissible loan agreements also include investment capital exchanged for a note, bond, convertible debt, obligation, or any other debt arrangement between the investor and the NCE.
If the investor is guaranteed the right to eventual ownership or use of a particular asset, such as the ownership or use of the real estate, USCIS will assume that some value is associated to the right or asset and will require that the investor deduct that value from their total capital contribution, thus disqualifying their application as not have satisfied the minimum investment requirement.
While secured and unsecured loans are acceptable under EB-5 regulations, the debt may not be secured by the underlying EB-5 investment.
Failure to adhere to these requirements can lead to issues with USCIS approval and potentially result in a denial of the investor's EB-5 petition.
