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Invest in Equity or a Loan

In order to qualify for an EB-5 visa, petitioners are required to invest equity into the NCE. However, the NCE has the flexibility to invest its capital into the JCE as equity or as a loan, though neither a loan agreement nor an equity agreement can offer a mandatory redemption (forced capital repayment).


EB-5 agents and investors tend to favor loans over equity investments because they believe that loans offer a clearer exit strategy and collateral. However, in reality, equity investments often have similar repayment triggers and similar rights to assets in the event of default.

It's crucial to review the loan agreement carefully to fully comprehend the loan terms, maturity date, covenants, collateral terms, events of default, notice of such events, cure periods, and remedies.

Standard loan provisions:

  • Loan term

  • Maturity date

  • Interest rate

  • Repayment terms

  • Representations and warranties

  • Conditions precedent to any loan advance

  • Affirmative and negative covenants

  • Terms of collateral

  • Clearly defined events of default (and notice of such events and cure periods)

  • Remedies

Typically, the NCE provides a loan term of five years to the JCE with the option of extending twice for one-year each time. This is because commercial real estate is a common type of EB-5 project, and it generally takes around 5 to 7 years to stabilize the project and qualify for a new loan to repay investors.


One benefit of preferred equity is that it can provide investors with the potential for higher returns, as they have an ownership stake in the project and may benefit from appreciation in value. Additionally, this model aligns the interests of investors with those of the project, as both parties share in the risks and rewards of the venture.

Exit strategies in equity investments usually take the form of incentives for the JCE to repay sooner. This might take the form of a large spike in the preferred dividend rate after a specific amount of time.

The investor's position in rights to the assets in case of company default are similar to mezzanine debt, as in both cases the investor has rights junior to the bank but senior to other equity.

Returns from Investment

Investors are allowed to receive returns from their investment as a distribution of profits from the NCE, even during the investment-sustainment period. But the distribution cannot be part of the investor’s investment capital and such a distribution cannot be guaranteed.

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