A significant shift in U.S. Citizenship and Immigration Services (USCIS) adjudication practices has opened new opportunities for EB-5 investors. A federal court ruling has clarified that unsecured loans are now considered a valid source of investment funds under the EB-5 program. Previously, USCIS mandated that loan proceeds used for EB-5 investments had to be backed by the investor’s own equity—such as home mortgages, home equity lines of credit, auto loans, or 401(k) loans.
This groundbreaking change means that investors are no longer restricted to securing their loans against personal assets, potentially broadening access to the EB-5 program. However, while the ruling expands financing options, it also introduces new requirements—most notably, the lender must now document their own source of funds to establish that the capital was legally obtained.
Understanding the Matter of Zhang
The landmark case Zhang v. USCIS (Civil Action No. 2015-0995, D.D.C. 2018) represents a turning point in EB-5 investment financing. Before this ruling, USCIS required that all loan proceeds used in an EB-5 investment be personally secured by the investor’s assets of equal or greater value than the loan amount. This restrictive policy effectively limited the ability of many prospective investors to participate in the EB-5 program.
USCIS’s Regulatory Overreach Challenged
In Zhang, immigration attorney Ira Kurzban successfully argued that loan proceeds should be treated as cash rather than “contributed indebtedness.” The court agreed, ruling that USCIS had no regulatory basis to impose additional conditions on how the loan was structured, so long as the capital was lawfully obtained.
Specifically, the court determined that:
- USCIS cannot require an EB-5 investor’s loan to be secured by personal assets.
- USCIS cannot mandate that the investor be the primary debtor.
- The only requirement for loan proceeds is that they originate from a lawful source.
Furthermore, the ruling underscored that USCIS cannot unilaterally impose new requirements beyond those explicitly stated in existing immigration regulations—an important precedent that may open the door to challenging other USCIS adjudication practices under the Administrative Procedure Act.
Legally Obtained Capital and Job Creation: The True Focus of EB-5
Prior to Zhang, USCIS effectively imposed a policy that restricted EB-5 investments to capital raised only through the liquidation of an investor’s existing assets. The court, however, rejected this narrow interpretation, emphasizing that as long as the funds were legally obtained and contributed to job creation in the U.S., their source—whether from assets or debt—was irrelevant.
This ruling aligns with the fundamental objective of the EB-5 program: stimulating the U.S. economy through foreign investment and job creation. From an immigration policy standpoint, USCIS should not concern itself with whether an investor repays their loan, as the primary goal is ensuring that the investment capital is fully deployed for economic benefit.
It’s important to note that under long-standing EB-5 regulations, the investor cannot use the EB-5 investment itself as collateral for the loan. Doing so could have serious immigration consequences if the collateral were seized due to loan default. However, once the funds are invested, the New Commercial Enterprise (NCE) retains the capital, fulfilling the purpose of the EB-5 program.
Increasing Access: A New Pool of Potential EB-5 Investors
With this ruling, access to EB-5 investment opportunities has expanded significantly. Previously, many high-earning professionals—particularly younger individuals without significant liquid assets—were effectively excluded from the program unless they received gifts from family members. While some families may be willing to give a $500,000 or $800,000 gift to support an investor’s immigration journey, others may prefer to provide a loan instead.
Under the Zhang ruling, such personal loans are now permissible, opening the EB-5 program to a broader demographic of investors who may not have previously been able to participate due to liquidity constraints.
The Future of EB-5: Greater Flexibility and New Opportunities
The Zhang ruling represents a pivotal shift in EB-5 financing, removing unnecessary barriers imposed by USCIS and expanding investment options for foreign nationals seeking U.S. residency. By reaffirming that loan proceeds—whether secured or unsecured—are simply cash, the court has enabled a new wave of investors to access the EB-5 program.
This decision not only reinforces the legal principle that USCIS must adhere to existing regulations rather than create new, unwritten requirements but also sets the stage for further challenges to agency overreach. As the EB-5 landscape evolves, innovative financing structures, including unsecured loans and club-style investing, are likely to shape the program’s future.
For those considering an EB-5 investment, the ability to secure funding through unsecured loans could be a game-changer—offering greater flexibility while maintaining the program’s core mission of job creation and economic growth.
For Your Reference
- Article: EB-5 Funds Obtained From Unsecured Loans Now Legal Under Zhang By Matt Gordon.
- Case: Zhang v USCIS Civil Action No. 2015-0995 (D.D.C. 2018)