Loan vs Self-Directed IRA for EB-5 Investments: Understanding Your EB-5 Funding Options

June 15th, 2024 Colin Behring

When considering an EB-5 investment, choosing the right funding method is crucial. This article will explore the differences between using a loan vs a self-directed IRA for EB-5 investments, highlighting the financial implications, benefits, and considerations for each option.

Table of Contents

Understanding the Basics of Loan vs Self-Directed IRA for EB-5 Investments

Before diving into the specifics, let’s clarify what each option entails:

  • Loan: Taking a loan means borrowing money to fund your EB-5 investment, which involves paying back the principal amount with interest. Loans offer flexibility as they are not restricted by retirement account rules and do not need an administrator’s approval. However, they require comprehensive source of funds documentation from the lender, and there may be processing fees. For EB-5 investor loans and options, you can contact the Unity Lender team or apply directly here.
  • Self-Directed IRA: This allows you to use retirement funds to invest in an EB-5 project. While these funds are typically restricted and must go through an account administrator, the source of funds documentation might be simpler since it generally comes from earnings. Self-directed IRAs also have processing fees. Importantly, self-directed IRA investments are inherently safer in terms of personal risk—if the investment fails, you don’t have to repay the IRA, whereas a loan still requires repayment. However, if you lose your investment funded personally, you can be eligible for tax deductions, a benefit not available with IRA funds due to their tax-advantaged status.

Additionally, the term length of your EB-5 project can influence your decision:

  • Longer Term Projects: These are more expensive if borrowing funds due to extended interest payments.
  • Shorter Term Projects: These have less interest exposure, making loans more appealing for quick returns. Shorter investment options is relatively new feature of the 2022 RIA policy. Learn more by talking to Behring’s team.

Secured Loans vs Unsecured Loans vs Self-Directed IRA

Secured Loans: These loans are backed by collateral, such as real estate or other assets. Advantages include lower interest rates and easier approval processes. However, they put an additional asset at risk, which could be forfeited if the loan is not repaid.

Unsecured Loans: These loans do not require collateral, making the underwriting process simpler and faster. They do not encumber other assets but generally come with higher interest rates and stricter eligibility requirements.

Self-Directed IRA: Unlike loans, self-directed IRAs do not require repayment or accrue interest. They provide a tax-advantaged way to use retirement funds for investments. However, these funds are typically restricted and can only be used for specific purposes.

It is also possible to obtain lending options against a self-directed IRA account, which might offer a middle ground by providing funds without requiring additional collateral.

Financial Implications of Loan vs Self-Directed IRA for EB-5

One of the primary differences between using a loan and a self-directed IRA is the cost of capital:

  • Loans: When using a loan, you incur interest expenses. This means your investment must generate returns higher than the interest rate to be profitable.
  • Self-Directed IRA: Using self-directed IRA funds incurs no interest expense. However, it’s important to note that these funds are usually encumbered and can only be used for specific purposes.

Tax Considerations for Loan vs Self-Directed IRA for EB-5

Tax implications are a significant factor when choosing between these two options:

  • Loans: The interest paid on loans might be deductible, but this depends on various factors, including the purpose of the loan and your tax situation.
  • Self-Directed IRA: Investing through a self-directed IRA offers unique tax benefits. Using IRA funds means you won’t have to sell stocks or other assets, avoiding a taxable event. Selling $800k of stocks to invest in EB-5 could result in a net investment of significantly less after paying capital gains taxes.

Opportunity Cost of Loan vs Self-Directed IRA for EB-5

Considering the opportunity cost is crucial:

  • Loans: Using a loan allows you to keep other investments intact, potentially yielding returns elsewhere.
  • Self-Directed IRA: The performance of your self-directed IRA investments might differ from EB-5 investments. For instance, U.S. equities have performed well recently, and moving funds might impact your overall returns. However, the opportunity cost of moving self-directed IRA money to EB-5 might not be significant over the next 3-5 years.

USCIS Compliance for Loan vs Self-Directed IRA for EB-5

Both funding methods are acceptable to USCIS as long as your Source of Funds (SOF) documentation meets their standards. It’s crucial to ensure your documentation is thorough and accurate, regardless of the funding method chosen.

Practical Considerations of Loan vs Self-Directed IRA for EB-5

  • Loans: Provide immediate access to capital but come with repayment obligations and interest costs.
  • Self-Directed IRA: Enables the use of retirement funds that might otherwise be locked, offering a flexible financing solution without additional cost.


Choosing between a loan and a self-directed IRA for your EB-5 investment depends on your financial situation, investment goals, and tax considerations. Both options have their advantages and potential drawbacks. Behring EB-5 offers both financing methods, providing flexibility for investors. It’s recommended to consult with financial advisors to determine the best approach for your specific circumstances. For personalized advice, make an appointment with Behring’s team of experts.

For more detailed insights, check out our related articles on Behring EB-5 and our YouTube videos:

Behring’s RISE fund is an EB-5 investment option that accepts both unsecured loans and self-directed IRA for EB-5 investment. The RISE fund focuses on high-quality real estate projects, offering a robust investment opportunity.

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